Currency is any money that is acceptable as a medium of exchange. Typically, that means a government-backed money, issued either in paper or metal coins. And whenever you travel or trade between countries you need currency.
And just like there is market for everything- there is market for currency as well. And in this market the participants are buying or selling one currency in exchange for another. It’s the most heavily traded market in the world because people, businesses, and countries all participate in it, and it’s an easy market to get into without much capital.
When you go on a trip and convert your U.S. dollars for euros, you’re participating in the global foreign exchange market. At any time, the demand for a certain currency will push it either up or down in value relative to other currencies.
In ancient times, people use to operate on the principle of barter and traded goods with each other as forms of payment. Today, the world runs on the power of currency, and there is a large variety of it across the world. Thus they are bought and sold in a market.
The participants in this market are from around the world. They buy and sell different currencies. Currency trading participants comprise banks, corporations, central banks (like RBI in India), investment management firms, hedge funds, retail forex brokers, and investors.
Significance of Currency market:
The currency market is essentially a global, decentralized market for the trading of currencies. The foreign exchange rates for every currency are determined by the currency market. It includes all matters of currency trading such as the buying, selling, or exchanging of currencies at their present value or a decided value.
It is important to note that the currency market is not a single place or location, but is rather used to refer to a system. It is made up of a number of financial centers where foreign exchange transactions take place round the clock.
The foreign exchange market is also an important reflection of the economies around the world. The price of one currency compared in terms of another currency is known as its exchange rate. This exchange rate is a vital indication of the economic health of the country the currency belongs to. A high exchange rate for a currency gives more economic advantage to that country while a low exchange rate denotes the opposite.
What Will You Learn?
- You might have come across jargons like Currency Pair, Appreciation/Depreciation, Two Way Quotes, Cross Rates, Hedgers and so many more. The concepts seem to be difficult to understand but are actually very easy to understand if you try to relate it to practical examples. The course will be helpful for beginners looking understand concepts related to currency markets and would also useful for learners from a non-finance background.