Participants In Foreign Exchange Market

Participants In Foreign Exchange Market

The main players in foreign exchange market are as follows:

1. CUSTOMERS

The customers who are engaged in foreign trade participate in foreign exchange market by availing of the services of banks. Exporters require converting the dollars in to rupee and imporeters require converting rupee in to the dollars, as they have to pay in dollars for the goods/services they have imported.

2. COMMERCIAL BANKS

They are most active players in the forex market. Commercial bank dealing with international transaction offer services for conversion of one currency in to another. They have wide network of branches. Typically banks buy foreign exchange from exporters and sells foreign exchange to the importers of goods. As every time the foreign exchange bought or oversold position. The balance amount is sold or bought from the market.

3.   CENTRAL BANK

In all countries Central bank have been charged with the responsibility of maintaining the external value of the domestic currency. Generally this is achieved by the intervention of the bank.

4. EXCHANGE BROKERS

Forex brokers play very important role in the foreign exchange market. However the extent to which services of foreign brokers are utilized depends on the tradition and practice prevailing at a particular forex market center. In India as per FEDAI guideline the Ads are free to deal directly among themselves without going through brokers. The brokers are not among to allowed to deal in their own account allover the world and also in India.

5. OVERSEAS FOREX MARKET

Today the daily global turnover is estimated to be more than US      $ 1.5 trillion a day. The international trade however constitutes hardly 5 to 7 % of this total turnover. The rest of trading in world forex market is constituted of financial transaction and speculation. As we know that the forex market is 24-hour market, the day begins with Tokyo and thereafter Singapore opens, thereafter India, followed by Bahrain, Frankfurt, paris, London, new york, Sydney, and back to Tokyo.

6. SPECULATORS

The speculators are the major players in the forex market.

Bank dealing are the major pseculators in the forex market with a view to make profit on account of favorable movement in exchange rate, take position i.e. if they feel that rate of particular currento go up in short term. They buy that currency and sell it as soon as they are able to make quick profit.

Ø  Corporation’s particularly multinational corporation and transnational corporation having business operation beyond their national frontiers and on account of their cash flows being large and in multi currencies get in to foreign exchange exposures. With a view to make advantage of exchange rate movement in their favor they either delay covering exposures or do not cover until cash flow materialize.

Ø  Individual like share dealing also undertake the activity of buying and selling of foreign exchange for booking short term profits. They also buy foreign currency stocks, bonds and other assets without covering the foreign exchange exposure risk. This also result in speculations.