Palconite, Angellie Amor R.

3/BSMA/A

Foreign Exchange Market: A Reflection Paper

There is one feature that distinguishes a foreign business from a domestic business: the use of
multiple currencies in commercial transactions. By studying the foreign market, we can rationalize how
money affects the economy. Among the most important financial markets is the foreign exchange market.
One of the effects is the probable cost of goods among countries, which can have an impact on trade. It
has an effect on the price of imports and, this will result, on the price level of a region (inflation rate). Also,
the effect is visible on foreign funding and investment decisions. People, companies, and organizations all
over the world can exchange one currency for another through foreign exchange markets. As a result,
Forex trading is mainly used to keep the global economy running by allowing transactions between
people from different countries who use different currencies. This builds rapport between other countries
to be able to achieve globalization that is timely and relevant to have a competitive economy.

Simpy, a foreign exchange market defines as a cross-currency financial market that is responsible
for exchanging currency for another. The buying and selling of currency crosses for speculative purposes,
this is related to make money, or most commonly known as forex trading. Individuals or private sectors,
businesses, and/or organizations may convert one currency into another through the foreign exchange
market. In this way, the possibility of reaching another country is beyond capable.

The economic situation of a nation has a significant effect on the economy, such as inflation and
interest rates. It can be seen in the protected interest parity, exposed interest parity, and purchasing
power parity, referring to a certain theory I was able to grasp. We all know that during a recession, the
exchange rate should rise, which is bad for exporters, and during a recession, the exchange rate should
fall, which is bad for importers. The following example, on the other hand, shows that when the exchange
rate depreciates, there are consequences.

As far as the discussion goes, foreign exchange has by one of the world's biggest stock market by
a long blast. The list of daily transactions in this market is the highest across the globe, either in terms of
quantity and volume. Consequently,the market where the most operators operate on a daily basis.

Focusing on a foreign exchange can provide you benefits, for example, we can say that stocks are
more valuable than all other assets with the corresponding reason that investors trust in the company's
intrinsic value rather than short-term market fluctuations, this means the investors chose those which are
more difficult to forecast for stocks than for other assets. Basically, value investment analysis, or analysis
aimed at determining an asset's true value, can be a recipient even better on stocks. Yet, short- to
medium-term value investing is far complicated. Therefore, value investing is a great choice suited to the
long term.

The ability to study forex opens great opportunities. As we aim for interdependency and
inclusiveness, this can be a huge leap on the organization once mastered. However, we cannot deny that
there are external factors that can hinder us on our target goal. In fact, multiple dilemmas and downturns
were faced by many countries. The good thing is that they can still cope with the changes and adapt to
stay afloat.