In a foreign currency trading foreign exchange against domestic deposit money to be bought and sold, which) will be either delivered in two business days (known as spot transactions or Kassadevisen or those that come to these foreign currency at a later date (so-called forward or Termindevisen). However business is set with a date already in the business end of the current exchange rate and the performance of this business is carried on the agreed date in the future. Forex cash in foreign currencies are normally. This exchange may take the form of bills, deposit money or checks as well, which you can pay abroad experience - but not in the form of banknotes or coins.
Very often, the foreign exchange trading in the form of telephone trading between foreign exchange dealers conducted as in the actual foreign currency exchange. Come on the foreign exchange market or stock exchange both demand and supply for a particular currency, and together we shall determine the current exchange rates, which take place at the real foreign exchange trading.
But who are the participants in the foreign exchange market? In general, both brokers and major institutional investors as well as the German Bundesbank and the central banks, the actual participants in the foreign exchange trading.
To ease the foreign exchange trading, the currency through key currencies such as the U.S. dollar settled. The U.S. dollar is also viewed as a kind of "turning currency". This creates a cross rate. A cross rate is the rate that has emerged from between two different currencies. The foreign exchange trading is also determined in an open economy by constantly cross-border and carried out payment transactions.
To the customer orders received by the Bank to meet the credit institution to be able to be based from the banks each official exchange quotation of the relevant stock exchange. There are also currencies which are not officially listed. These currencies are traded, however, to a free market price.
Furthermore, the balances in certain places abroad are paid in the relevant domestic currency of each country. In general, the payment locations internationally important financial centers, which applied to the payment instruction is SWIFT. Ie SWIFT: Society for Worldwide Interbank Financial Telecommunication.
In terms of foreign exchange trading, there are some criticisms. For example, is criticized in currency crises, which sometimes occur, that the huge amount of acting in the world foreign exchange trade is characterized mainly by speculation, which act destabilizing. However, many foreign exchange transactions related to the risk cover. For example, when a number of portfolio investment or export operations but also hedged on forward exchange contracts against the daily fluctuations of currencies. In addition, at the international level, very large financial items such as high-risk loans, or postponed and currency transactions by banks to other business partners, because they fit better into the risk calculus of the counterparties.
It also will attend two currencies that can not be traded directly to each other, needs such as the Czech koruna and the Mexican peso, several transactions to occur, for example on the euro or dollar from one currency to another currency. This naturally leads to the consequence that need to be done about six to ten stores between banks at each cross-border trade transaction between the companies, according to estimates by the IMF.
To get an overview of the turnover of the global foreign exchange markets (futures and cash market) to determine the Bank for International Settlements, at regular intervals, the foreign exchange market turnover. For example, the global foreign exchange sales per day in April 2004 at about 1880 billion U.S. dollars. Twelve years earlier - in 1992 and then adjusted for exchange rate changes - the foreign exchange market turnover stood at only 840 billion U.S. dollars. If we extrapolate this to one year with 250 trading days, this amounts to a foreign exchange market turnover of approximately 470,000 billion U.S. dollars. If we compare this value to the value of global exports of goods held in and services from more than 11,000 billion U.S. dollars in the year 2004, global foreign exchange market turnover appears to be very high.
