FOREIGN

EXCHANGE
 WHAT IS FOREIGN
EXCHANGE?
NICK LIOUDIS

Foreign exchange, or forex, is the exchange of one country's currency

for another. In a free economy, the value of a country's currency is
determined by supply and demand. In other words, a currency's value
can be PEGGED to another country's currency, such as the US dollar,
or to a basket of currencies. The government of a country may also
determine the value of its money.
The value of any particular currency is
determined by market forces related to
trade, investment, tourism, and
geopolitical risk.
Pegged or Pegging
Pegging refers to the practice of attaching or tying a
currency's exchange rate to another
country's currency. Pegging often involves preset
ratios, which is why it's called a fixed rate. Pegs are
often put in place to provide stability to a nation's
currency by linking it to an already stable currency.
 TRADE
Trade is the voluntary exchange of goods or services between different
economic actors. Since the parties are under no obligation to trade, a
transaction will only occur if both parties consider it beneficial to their
interests.
Trade can have more specific meanings in different contexts. In financial
markets, trade refers to purchasing and selling securities, commodities,
or derivatives. Free trade means international exchanges of products and
services without obstruction by tariffs or other trade barriers.
How does FREE TRADE works?
A free trade agreement is a pact between two or more
nations to reduce barriers to imports and exports among
them. Under a free trade policy, goods and services can be
bought and sold across international borders with little or
no government tariffs, quotas, subsidies, or prohibitions to
inhibit their exchange.
 Free Trade Models

•Bilateral Free Trade Agreements.

•Multilateral Free Trade Agreements.
•Regional Free Trade Agreements.
•Plurilateral Free Trade Agreements.
•Preferential Trade Agreements (PTAs)
 Bilateral Free Trade Agreements
A bilateral agreement, also known as a clearing trade
or side deal, is an agreement between two or more
parties or states to reduce trade deficits. It varies
according to the type of agreement, its scope, and
the countries participating.
 Multilateral Free Trade Agreements.

A multilateral agreement involving three or more countries

aims to reduce trade barriers. Barriers such as taxes,
subsidies, and embargoes hinder a country's capacity to
import and export goods.Multilateral offers are regarded
the finest strategy for creating a truly global economy that
opens markets to both small and large countries on equal
ground.
 Regional Free Trade Agreements.

Regional trade agreements (RTAs) have risen in number and reach

over the years, including a notable increase in large plurilateral
agreements. Non-discrimination among trading partners is one of the
core principles of the WTO; however, RTAs, which are reciprocal
preferential trade agreements between two or more partners
 Plurilateral Free Trade Agreements.

Plurilateral agreements cater for instances where certain

Member States may agree on rules on trade in specific subjects
that not all Member States may agree to. As such, plurilateral
agreements come to the fore where there is no multilateral
consent. These plurilateral agreements therefore only bind
Member States that have signed up to them .
 Preferential Trade Agreements
A preferential trade area (also preferential trade
agreement, PTA) is a trading bloc that gives preferential
access to certain products from the participating
countries. This is done by reducing tariffs but not by
abolishing them completely. It is the first stage of
economic integration.
 -Tariffs-One of the ways governments deal with trading
partners they disagree with is through tariffs. A tariff is a tax
imposed by one country on the goods and services imported
from another country to influence it, raise revenues, or
protect competitive advantages.
-Trade Barries - A trade barrier refers to any regulation or
policy that restricts international trade, especially tariffs, quotas,
licences etc.
Example
In trade, there has to be a supplier who supplies or
offers the goods or services and the buyer who buys
the goods or services provided by the supplier. For
example, if an individual is selling a pen, they would
be the supplier, and if you bought a pen from a
supplier for a certain sum, you would be a buyer.
 Bubbles
A bubble is an economic cycle that is characterized
by the rapid escalation of market value, particularly
in the price of assets. This fast inflation is followed
by a quick decrease in value, or a contraction, that is
sometimes referred to as a "crash" or a "bubble
burst."
Thank you