Foreign Exchange
Any transaction as vast and important as foreign exchange needs a platform to be executed. Hence it takes place in a foreign exchange market. This is a global financial market and is particularly developed for trading of currencies. This market is the biggest in the world. The transactions here are not in small amount but instead the worth of transactions goes up to trillion dollars. This is a busy market as the foreign exchange transaction take place round the clock and on all weekdays.
The deals in this market are not related to the small transactions done by tourists, but large sum transactions between a network of foreign exchange dealers, around the world. For example a major bank in a country may need the currency of some other country and hence make an exchange of currencies
It is the relation of every currency with each other, which makes foreign exchange possible. All currencies’ value is relative to each other. The foreign exchange doe not necessarily means cash. Some lines of credit, such as credit cards or traveler’s cheques are also included in foreign exchange. In other words, foreign exchange is any negotiable instrument which is denominated in terms of any currency.