The Top Ten Management Primer on The Nature of The Foreign Exchange Market: All That You Need to Know About The Basics of What Happens in The Exchange Between Currencies
Info: This review of the top ten things you need to know about the Nature of the Foreign Exchange Market was prepared by Major Hatcher while a Management major in the College of Business at Southeastern Louisiana University in Hammond, Louisiana.
Introduction
In this article I explain what a foreign exchange is, where they take place, and just how big of a market it is. I also go over arbitrage, what it means and how it is trying to be prevented by high-speed connections. At the end of the article I have placed a couple of videos that I believe may shed some light on the topic and may help you understand a little better.
The Idea in a Nutshell
Foreign exchange is a form of exchange for the global trading of international currencies. The foreign exchange market determines the relative values of different currencies. The modern foreign exchange market began taking shape in the 1970’s due to the switch from fixed rates, which were set in place after World War ll, to the floating exchange rates we have today.
The 10 Things You Need to Know About The Nature of the Foreign Exchange Market
1. In March of 1986, The average total value of global foreign exchange trading was about $200 billion per day. According to the Bank for International Settlements, as of April 2010 that amount has grown to $4 trillion.
2. The most important trading centers are: London, New York, Tokyo, and Singapore. Major secondary centers include Zurich, Frankfurt, Paris, Hong Kong, and Sydney.
3. London leads the pack with 31% of all foreign exchange, while New York follows with 19%.
4. London’s advantage in the foreign exchange market is due to its history and geography. England was the first major industrial trading nation and it sits neutrally between New York and Tokyo.
5. The foreign exchange market never sleeps. Tokyo, London, and New York all shut down for 3 out of 24 hrs. During these three hours, trading continues in minor centers, particularly San Francisco and Sidney, Australia
6. The integration of various trading centers plays a huge role in the effectiveness of the market. High-speed computer networks between trading centers around the globe have made a single market. It assures that opportunities to partake in arbitrage are very small.
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Published in: Personal Finance
Andyb87 | Apr 30, 2012 | Reply
In 2006 I was able to see this primer first hand when I went to China and the exchange rate was 8 yuan to 1 dollar. Today the market has fluctuated and the yuan is now worth 6 to 1 dollars. Now with foreign exchange markets begin open all the time I would expect them to even over the next couple of years.
Christina Read | May 1, 2012 | Reply
An efficient market should have only one currency. Even though we have an extremely complex and reliable system of currency exchange, there still exists the possibility for making or losing money on the trading of currencies. A single currency system, such as the Euro, benefits each country by setting common prices and a common rate of exchange for each country. Since Europe adopted the Euro, each countries economy has grown and become more stable. Before the advent of the Euro, the foreign exchange market adjusted for the stability of each country’s economy. Today, the market serves a similar role, but instead of juggling a dozen currencies, it only juggles one or two.