There are three broad exchange rate systems—currency board, fixed exchange rate and floating rate exchange rate. A fourth can be added when a country does not have its own currency and merely adopts another country's currency. The fixed exchange rate has three variants and the floating exchange rate has two variants. 1. Fixed (or Pegged) Exchange Rate: This consists of [...]
The following points highlight the top seven characteristics of foreign exchange market. The characteristics are: 1. Most Liquid Market in the World 2. Most Dynamic Market in the World 3. Twenty-Four Hour Market 4. Market Transparency 5. International Network of Dealers 6. Most Widely Traded Currency is the Dollar 7. "Over-The-Counter" Market with an "Exchange-Traded" Segment. Characteristic # 1. Most [...]
The main participants in the foreign exchange market include foreign exchange dealers, financial and non-financial customers, central banks and brokers. Participant # 1. Foreign Exchange Dealers: Most commercial banks in the United States customarily have bought and sold foreign exchange for their customers as one of their standard financial services. But beginning at a very early stage in the development [...]