Report on foreign exchange market
ACKNOWLEDGEMENT
‘‘In the name of Allah most merciful and beneficent’’ “Weraise in degree of rank whom so ever we pleased; and ourevery pressure of knowledge is one, most knowing”.(Al-Quran)
We are very thankful to ALLAH Almighty who gave us the opportunity, courage andconfidence to explore more knowledge to complete this project and for His (ALLAH) blessings that have brightened every part of our lives, and
our parents
whose prayersalways supported us in every task of our life. While working on this project, we wereguided by our experience, knowledge and interest in the subject ‘‘InternationalFinance”. Beyond of all the material available we are very thankful to our respectedand honorable resource person
“Miss. Izza Ahmad”
for giving us such knowledgeabout the subject that make ‘‘International Finance’’ a very motivating subject. This become possible only due to her very unique style of teaching we ever experiencedduring our academics lives. And through her motivational behavior we are able tocomplete this complex task.Besides this we would like to thank our seniors who showed their kind concerntoward the completion of this final project of ‘‘International Finance’’.
Institute of Management Sciences City Campus, BZU, Multan
1
Report on foreign exchange market
PREFACE
Research reports are very important part of MBA program. Keeping this thing in viewwe were assigned a report to elaborate “Foreign Exchange Market”We wish to thank our learned instructor Miss Izza Ahmad whose kind and informativeguidance transforms the research material into a worth reading report. Her scholarlytouch had imprinted on our minds to last through out our career. She really leads alasting impression in novice minds.Maximum efforts have been exerted to complete the report and we hope that a reader will find it useful and beneficial.
Institute of Management Sciences City Campus, BZU, Multan
2
Report on foreign exchange market
Foreign Exchange Market
The
foreign exchange market
(
currency
,
Forex
, or
FX
)
market
is where currencytrading takes place. It is where banks and other official institutions that facilitate the buying and selling of foreign currencies. FX transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another.The foreign exchange market that we see today started evolving during the 1970swhen worldover countries gradually switched tofloating exchange ratefromfixedas
per theBretton Woods systemtill 1971.Today, the FX market is one of the largest and mostliquidfinancial markets in theworld, and includes trading between large banks,central banks, currencyspeculators,
corporations,governments, and other institutions. The average daily volume in theglobal foreign exchange and related markets is continuously growing. Traditionaldaily turnover was reported to be over US$3.2 trillion in April 2007 by theBank for
International Settlements. Since then, the market has continued to grow. According toEuromoney's annual FX Poll, volumes grew a further 41% between 2007 and 2008.The purpose of FX market is to facilitate trade and investment. The need for a foreignexchange market arises because of the presence of multifarious internationalcurrencies such as US Dollar, Pound Sterling, etc., and the need for trading in suchcurrencies.
Market size and liquidity
The foreign exchange market is unique because of
•
its trading volumes,
•
•
its geographical dispersion,
•
its long trading hours: 24 hours a day except on weekends
•
•
the low margins of profit compared with other markets of fixed income(but profits can be high due to very large trading volumes)
•
the use of leverage
Institute of Management Sciences City Campus, BZU, Multan
3
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