Finance homework


Question Description

Hi, please answer the question. I need 5 pages and please I need outline for the essay. the essay should related to the US. Let me know when you have any question. here is the question :

Foreign exchange market: describe it; how big is it? who are the participants? how

important is it?

Tutor Answer

School: Rice University

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Running Foreign Exchange Market



Foreign Exchange Market


Foreign Exchange or the word is commonly known as the Forex market, is the
exchanging method from one currency (Say US $ to another Japanese Yuan ¥) to another. The
purpose of establishing the forex market is to allow buyers to buy products from the other
country in the currency of that country. For instance, the US manufacturer sells the components
to a Japanese company for yen and the Japanese company sells the auto parts to a US buyer in
dollars. Both the buyers and sellers will prefer to receive the payment in their own country's
currency the US seller will prefer to get US dollars whereas the Japanese one will prefer to
receive payment in Yuan. Without a foreign exchange market, the individual buyers and sellers
will not get any convenient source to look out for one another. In such situations, the foreign
exchange market plays its role to perform as a mediator. The forex market is the biggest financial
market in the entire world operating every minute, hour and every day with the prices moving up
and down and the currencies trading. Spot, Forward, and the Futures are the foreign exchange
business adopted terms to settle business terms, in the spot term market transaction is mainly
based on exchange of currencies at the current market price, In the Forward transaction is the
agreement to buy and sell the amount of currencies in decided price at some future date, most of
the businesses broadly used the forward term to handle the foreign exchange market risks.
Futures transactions are uniformed forward agreements traded on an exchange. The Individuals
are also involved in foreign exchange transactions by performing transactions like moving or
touring another country for individual or business purposes but mostly are the business people
names as traders buy the currency and sell it on some profit price earns money on trading
currencies. They keep themselves active in price bidding and price offer, the bid price is the one

Foreign Exchange Market


on which they buy the currency and the price at some profit they sell called offering price.
(Bordo, M. D., Humpage, O. F., & Schwartz, A. J. 2016).
Federal Reserves and the Treasury departments of the US, monetary authorities play its
role sporadically to counter the market disorders and provide support in running the Fx business
smoothly. The US government uses different ways to manipulate the exchange rate of Dollars
besides foreign currencies.
Size of Foreign Exchange Market
The foreign exchange or the forex market is the largest market in the world and it
considers being bigger than the stock market. The trading is exceeding more than $5 trillion
every day. The trading took place over the counter market through electronic sources as well as
telephonic among the bankers and the other financial market contributors. Thousands of US are
trading daily in the forex market ensuring the needs and requirements of the exporters and
importers and the tourist exchanging currencies to the required destination. This is the biggest
financial market in the world contributing to the economic stability and growth of the US.
(Weisweiller, R. 2017)
Participants of Foreign Exchange Market
From Individual to large businesses each one playing and participating in its role in the
foreign exchange market and sharing their part in keeping it the largest financial market. These
participants in the forex market include Corporations, Central Bank, Commercial Banks, Hedge
Funds, and the Government. (Wang, G. J., & Xie, C. (2016).

Foreign Exchange Market


1. Corporations
Businesses need to create new horizons and mostly the companies that are expending
need to grow and expand its businesses and ventures in the other countries to create new buyers
of its product and even seeking to establish contract on import and export businesses to attract
the customers residing in the country from where th...

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