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The Forex (currency, foreign exchange, or FX) is an organizational setting within which individuals, businesses, governments, and banks buy and sell foreign currencies and other debt instruments.
The purpose of the forex trading is to help international trade and investment. A forex market helps businesses convert one currency to another. For example, it permits a U.S. business to import European goods and pay Euros, even though the business's income is in U.S. dollars.
In a typical forex trading transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern Forex started forming during the 1970s when countries gradually switched to floating exchange rates from the previous exchange rate regime, which remained fixed as per the Bretton Woods system
The forex trading is unique because of its trading volumes, the extreme liquidity of the market, its geographical dispersion and many other factors.
forex market is considered to be a market closest to the ideal perfect competition, notwithstanding market manipulation by central banks. According to the Bank for International Settlements, average daily turnover in global forex market is estimated at $4 trillion. This approximately $4 trillion in main forex market turnover was broken down as follows:
- 31% in spot transactions
- 11% in outright forwards
- 53% trillion in foreign exchange swaps
- 5% estimated gaps in reporting |
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