FOREX FOREIGN EXCHANGE

FOREIGN EXCHANGE is commonly known as FOREX or FX. Foreign exchange is arena where nation’s currency trading is done. The foreign exchange market is largest financial market in the world with the turnover of $3.2 trillion. This market involved buying and selling of foreign currencies and taking profit from the difference of currency rate.

The main purpose of FOREX trading is to make investment and international transaction in aboard market. They also help the multinational firm to convert one currency to another currencies .For E.g. If U.S is importing goods from European firm thought their transaction is in $ dollar. FOREX market is profitable but at same time it is too risky.

It is a world wide market. The main foreign exchange dealers are retail clients, foreign exchange brokers, commercial banks and other permitted agents. Retail client’s deals through commercial bank and recognized agents. Commercial banks deal with other commercial banks and also with forex brokers. FOREX trade market has some authorized broker. Broker acts as the intermediaries between buyer and seller.

SUPPLY OF FOREIGN EXCHANGE:

Supply of foreign exchange or currency trading in a country comes from the receipt of its exports. The main sources of supply are:

1)    Exports of goods: This constitutes a major source of supply of foreign exchange. The size and price of exports influence the supply of foreign exchange. Both, the size and price depends on the demand elasticity for exports.

2)    Exports of services: Export of services is another important source of supply of foreign exchange. This source is gaining importance in recent years. Expert of services in various fields, tourist coming from other countries, transports, communication, finances, software and insurance consultancy are some of the important services which earn and supply foreign exchange.

3)    Unilateral receipts: Payment received in the form of remittance from the domestic working aboard, donations and all types of sided receipts form a part of foreign exchange supply.

4)    Import of capital: Foreign investment direct and portfolio repayment of debts by foreigners, all increase the supply of FOREX in FOREX trading.

FOREX have lot of advantages such as less amount of capital can be invest in foreign exchange market and it open 24 hrs a day it is not like a regular stock market. Hence FOREX trading is one of the factors contributing in countries development and in its economy.