FXchange
When people across the globe trade goods and services with each other, they seldom pay with cash for what they purchase. With the great security issue, each buyer usually arranges with a bank to pay whatever he owes in the currency of the creditor's country.
Isn't that convenient? Such a payment is made with a bill of exchange or known as credit. For example, suppose Bryan Smith, an American, has sold $1,000 worth of goods to John White, an Englishman while Christopher Walker, another American, has bought the same amount from William Schilles, another Englishman. Instead of the individual debtor sending money across the ocean, Christopher buys Bryan's claim upon John, paying in American money. Bryan then sends the claim to William, and William collects from John in English money.
With the outburst of technology, trading has never been easier and by far more accessible. International Trade along with internet banking and trading has enabled the ease of foreign exchange and made it available to a large number of people, companies and communities worldwide.
Today, the Foreign Exchange Market is known to traders as spot or cash market. It operates on a 24-hour, five days a week marketplace exchanging drafts and bills in terms of foreign currency. Such currency may be bought and sold in terms of another currency either for purposes of financing foreign transactions or for speculative purposes. It is considered a unique market due to its huge trading volume having a network of approximately 4,500 World Banks that trade currencies with each other.
Focal points of exchange activities are three main trading centers each located in London, New York, and Tokyo. Imagine being miles apart but still being up-to-date with your transactions. Despite this, various banks throughout the world still participate in trading.
Due to the different locations and time zones, scheduling of trading sessions start and end after each other. For instance, as the Asian trading session signs off, the European trading session kicks off, then the US trading, and the cycle begins. This gives traders the advantage of monitoring and reacting to news as it happens, when it happens. Surely, convenience is the top of mind.
Major players in these trading are the US dollar, Japanese Yen, the Euro, UK Sterling, the Swiss Franc, Canadian and Australian dollars. As in all business ventures, foreign exchange trading objective is to buy low and sell high. Traders engaged in this are constantly on the lookout for fluctuations in exchange rates caused by real-time monetary flows as well as expectations of any deviations with these activities.
Such movements are caused by changes in the total monetary market value of all the goods and services produced by an economy within a nation during a particular period known as Gross Domestic Product or GDP growth and other macroeconomic conditions.