Join Your Exam WhatsApp group to get regular news, updates & study materials HOW TO JOIN

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market : Economics is a study of man in the ordinary business of life. It inquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man. Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

Here we provide direct download links for Karnataka Class 12 Commerce Economics Foreign Exchange Market  Important Notes in pdf format. Our tem members provides some video classes and Best Economics books in Cakart.in. See all and buy your best authors books and video classes here.

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market : The foreign exchange market (Forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This includes all aspects of buying, selling and exchanging currencies at current or determined prices. In terms of trading volume, it is by far the largest market in the world, followed by the Credit market.

The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. Since currencies are always traded in pairs, the foreign exchange market does not set a currency’s absolute value but rather determines its relative value by setting the market price of one currency if paid for with another. Ex: 1 USD is worth X CAD, or CHF, or JPY, etc..

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market : The foreign exchange market works through financial institutions, and operates on several levels. Behind the scenes, banks turn to a smaller number of financial firms known as “dealers”, who are involved in large quantities of foreign exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the “interbank market” (although a few insurance companies and other kinds of financial firms are involved). Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars. Because of the sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions.

The foreign exchange market assists international trade and investments by enabling currency conversion. For example, it permits a business in the United States to import goods from European Union member states, especially Eurozone members, and pay Euros, even though its income is in United States dollars. It also supports direct speculation and evaluation relative to the value of currencies and the carry trade speculation, based on the differential interest rate between two currencies.

The foreign exchange market is unique because of the following characteristics:

  • its huge trading volume, representing the largest asset class in the world leading to high liquidity;
  • its geographical dispersion;
  • its continuous operation: 24 hours a day except weekends, i.e., trading from 22:00 GMT on Sunday (Sydney) until 22:00 GMT Friday (New York);
  • the variety of factors that affect exchange rates;
  • the low margins of relative profit compared with other markets of fixed income; and
  • the use of leverage to enhance profit and loss margins and with respect to account size.

Download Karnataka Class 12 Commerce Economic Foreign Exchange Market Important Notes in Pdf Format 

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market : The foreign exchange market is the market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered the largest financial market in the world.

BREAKING DOWN ‘Foreign Exchange Market’

The foreign exchange market – also called forex, FX, or currency market – trades currencies. Aside from providing a floor for the buying, selling, exchanging and speculation of currencies, the forex market also enables currency conversion for international trade and investments.

The forex market has unique characteristics and properties that make it an attractive market for investors who want to optimize their profits.

Highly Liquid

The forex market has enticed retail currency traders from all over the world because of its benefits. One of the benefits of trading currencies is its massive trading volume, which covers the largest asset class globally. This means that currency traders are provided with high liquidity.

Open 24 Hours a Day, 5 Days a Week

In the forex market, as one major forex market closes, one in another part of the world opens. Unlike stocks, the forex market operates 24 hours daily except on weekends. Traders find this as one of the most compelling reasons to choose forex, since it provides convenient opportunities for those who are in school or work during regular work days and hours.

Leverage

The leverage given in the forex market is one of the highest forms of leverage that traders and investors can use. Simply put, leverage is a loan given to an investor by his broker. With this loan, investors are able to enhance profits and gains by increasing traders’ and investors’ control over the currencies they are trading.

For example, investors who have a $1,000 forex market account can trade $100,000 worth of currency with a margin of 1%, with a 100:1 leverage.

The Biggest in the World of Finance

In 2013, the Triennial Central Bank Survey of Foreign exchange and OTC Derivatives Market Activity provided statistics on the amount of currencies traded daily, and has stated an average of $4 trillion traded daily. The break-down of this amount shows that $1.490 trillion were traded in spot transactions, $475 billion in outright forwards, $1.765 trillion in foreign exchange swaps, $43 billion in currency swaps, and $207 billion in options and other forex products.

Functions of the Foreign Exchange Market

The foreign exchange market is the mechanism by which a person of firm transfers purchasing power form one country to another, obtains or provides credit for international trade transactions, and minimizes exposure to foreign exchange risk.

Transfer of Purchasing Power: Transfer of purchasing power is necessary because international transactions normally involve parties in countries with different national currencies. Each party usually wants to deal in its own currency, but the transaction can be invoiced in only one currency.

Provision of Credit: Because the movement of goods between countries takes time, inventory in transit must be financed.

Minimizing Foreign Exchange Risk: The foreign exchange market provides “hedging” facilities for transferring foreign

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Karnataka Class 12 Commerce Economics Foreign Exchange Market :  Before the Internet became widespread, the Forex was only available to banks, governments and large corporations. However, the introduction of the Internet has made it possible for anyone to access the foreign exchange markets, according to International Business Times. Do the following to access the Forex:

    1. Learn more about the Forex : Obtain information through the Internet and by talking to individuals who are already in the Forex business. The Internet is filled with free tools and tutorials about the Forex.
    1. Choose a broker : Choose a broker by going through online reviews and making a shortlist of the best brokers. Look for a broker with a good reputation, who charges reasonable prices and provides timely communication.
    1. Register an account : Register an account for Forex and make the minimum deposit required to begin trading. Deposits vary based on the type of account.
    1. Start trading : Begin trade by investing a small amount of money. Take note of the risks involved and consult a mentor for more tips whenever necessary.

Geographical Extent of the Foreign Exchange Market :

Geographically, the foreign exchange market spans the globe, with prices moving and currencies traded somewhere every hour of every business day. The market is deepest, or most liquid, early in the European afternoon, when the markets of both Europe and the U.S. East coast are open. The market is thinnest at the end of the day in California, when traders in Tokyo and Hong Kong are just getting up for the next day. In some countries, a portion of foreign exchange trading is conducted on an official trading floor by open bidding. Closing prices are published as the official price, or ‘fixing’ for the day and certain commercial and investment transactions are based on this official

The Size of the Market :

In April 1992, the Bank of International Settlements (BIS) estimated the daily volume of trading on the foreign exchange market and its satellites (futures, options, and swaps) at more than USD 1 trillion. This is about 5 to 10 times the daily volume of international trade in goods and services. The market is dominated by trading in USD, DEM, and JPY respectively. The major markets are London (USD 300 billion), New York (USD 200 billion), and Tokyo (USD 130 billion).

Karnataka Class 12 Commerce Economics Foreign Exchange Market Complete Information

Cakart.in provides India’s top Class 12 Commerce  faculty video classes – online & in Pen Drive/ DVD – at very cost effective rates. Get Class 12 Commerce  Video classes from www.cakart.in  to do a great preparation for primary Student.

Watch Class 12 Commerce  sample video lectures Visit cakart.in
Watch Class 12 Commerce  sample lecture books  Here
Watch Class 12 Commerce   free downloads  

Leave a comment

Your email address will not be published. Required fields are marked *