Foreign Exchange is the process of conversion of
one currency into another currency. For a country its currency becomes money
and legal tender. For a foreign country it becomes the value as a commodity.
Since the commodity has a value its relation with the other currency determines
the exchange value of one currency with the other. For example, the US dollar
in USA is the currency in USA but for India it is just like a commodity, which
has a value which varies according to demand and supply.
Foreign exchange is that section of
economic activity, which deals with the means, and methods by which rights to
wealth expressed in terms of the currency of one country are converted into
rights to wealth in terms of the current of another country. It involves the
investigation of the method, which exchanges the currency of one country for
that of another. Foreign exchange can also be defined as the means of payment
in which currencies are converted into each other and by which international
transfers are made; also the activity of transacting business in further means.
Most countries
of the world have their own currencies The US has its dollar, France its franc,
Brazil its cruziero; and India has its Rupee. Trade between the countries
involves the exchange of different currencies. The foreign exchange market is
the market in which currencies are bought & sold against each other. It is
the largest market in the world. Transactions conducted in foreign exchange markets
determine the rates at which currencies are exchanged for one another, which in
turn determine the cost of purchasing foreign goods & financial assets. The
most recent, bank of international settlement survey stated that over $900
billion were traded worldwide each day. During peak volume period, the figure
can reach upward of US $2 trillion per day. The corresponding to 160 times the
daily volume of NYSE.
0 Comments