Foreign exchange market

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"Forex" redirects here. For the football club, see FC Forex Braov. For the U.S. FBI sting operation, see Dominic Brooklier#Bompensiero murder.

Foreign exchange
Exchange rates

Currency band Exchange rate Exchange-rate regime

Exchange-rate flexibility

Dollarization Fixed exchange rate

Floating exchange rate Linked exchange rate Managed float regime Markets

Foreign exchange market

Futures exchange Retail foreign exchange Assets

Currency Currency future

Currency forward Non-deliverable forward Foreign exchange swap

Currency swap

Foreign-exchange option Historical agreements

Bretton Woods Conference Smithsonian Agreement

Plaza Accord Louvre Accord

See also

Bureau de change Hard currency

V T E

The foreign exchange market (forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends. Electronic Broking Services (EBS) and Reuters 3000 Xtra are two main interbank FX trading platforms. The foreign exchange market determines the relative values of different currencies.[1] The foreign exchange market works through financial institutions, and it operates on several levels. Behind the scenes banks turn to a smaller number of financial firms known as dealers, who are actively involved in large quantities of foreign exchange trading. Most foreign exchange dealers are banks, so this behind-the-scenes market is sometimes called the interbank market, although a few insurance companies and other kinds of financial firms are involved. Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars.[citation needed] Because of the sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions. The foreign exchange market assists international trade and investment by enabling currency conversion. For example, it permits a business in the United States to import goods from the European Union member states, especially Eurozone members, and payeuros, even though its income is in United States dollars. It also supports direct speculation in the value of currencies, and the carry trade, speculation based on the interest rate differential between two currencies.[2] In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying some quantity of another currency. The modern foreign exchange market began forming during the 1970s after three decades of government restrictions on foreign exchange transactions (the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states after World War II), when countries gradually switched to floating exchange ratesfrom the previous exchange rate regime, which remained fixed as per the Bretton Woods system. The foreign exchange market is unique because of the following characteristics:

its huge trading volume representing the largest asset class in the world leading to high liquidity;

its geographical dispersion;