Foreign Exchange Market (Forex/FX)

Foreign Exchange Market (Forex/FX) – The foreign exchange market, commonly called Forex or FX, is a decentralized global marketplace where currencies are traded and exchange rates are determined. It operates primarily over-the-counter (OTC), meaning transactions are conducted directly between participants rather than through a centralized exchange. Key Participants: Banks: Facilitate currency exchange for clients and manage foreign reserves. Forex Dealers & Brokers: Provide trading platforms and liquidity. Commercial Entities: Companies engaged in international trade needing currency conversions. Central Banks: Intervene to stabilize national currencies. Investment Firms & Hedge Funds: Speculate or hedge currency risks. Retail Traders & Investors: Participate via trading platforms. Key Features: Involves spot, forward, and derivative transactions. Influences global trade, investment, and monetary policy.

Example: A company in India importing goods from the US may buy US Dollars in the Forex market to pay the supplier, with the exchange rate fluctuating based on demand and supply dynamics