What is Foreign Exchange Market?

The foreign exchange market is the marketplace in which participants are able to sell,
purchase, exchange and theorize on currencies. Foreign exchange markets are made up of
investment management firms, banks, central banks, hedge funds, commercial companies
and investors and retail forex brokers.
The major participants in the foreign exchange market are commercial banks, forex brokers
and other legitimized dealers and monetary authorities. It is important to note that although
participants themselves may have their own trading centres, the market itself is world wide.
There is a close and continuous contact between the trading centres and the participants
deal in more than one market.

Demand for Foreign Exchange

People demand foreign exchange because, they want to buy commodities and services
from other nations; they want to send presents abroad and they want to buy financial assets
of a particular nation.

Supply of Foreign Exchange

Foreign currency flows into the host nation due to the following reasons:

 Exports by a nation lead to the buy its domestic commodities and services by the
foreigners send presents or make transfers
 The assets of a host nation are bought by the foreigners

What is Foreign Exchange Rate?

Forex rate or foreign exchange rate is the cost price of one currency in terms of another
currency. The currencies from the other nations are linked and associated which enables
the comparison of international costs and prices.