Foreign Exchange Market is the official financial center, where the buying and selling currencies and securities in foreign currency on the basis of supply and demand them.
In other words, from a functional point of view the currency market provides timely implementation of international payments, insurance against currency risks, the diversification of foreign exchange reserves, intervention, participants get their profit as the difference in exchange rates.
Currency intervention - a targeted purchases and sales of foreign currency restrictions dynamics of the national currency beyond its specific increase or decrease.
From an institutional point of view of the foreign exchange market is a set of banks, currency exchanges and other financial institutions.
From the organizational and technical point of view the currency market - a combination of telegraph, telephone, telex, electronic and other communications systems that connect to a single system of banks of different countries, make international payments, credit and other currency transactions.
The decisive factor in the currency trade is information. The exchange of information is conducted through a network of satellite imonytornoy zv'yazku.Monytory established in all financial institutions trading in foreign currencies. They are also brokers and other interested individuals and organizations.
The centers of the global currency market are financial centers.
> MFC - places of concentration of banks, specialized credit and financial institutions. They made international monetary, credit, financial transactions, securities, gold.
Today can be called Asian (with centers in Tokyo, Singapore, Hong Kong, Melbourne), European (London, Amsterdam, Paris, Frankfurt onproperty, Zurich), American (New York, Chicago, Los Angeles) markets.
The main functions of the global currency market:
1) the settlement of foreign trade agreements;
2) adjusting exchange rates;
3) diversification of foreign exchange asset market participants;
4) insurance (hedging) of currency risks;
5) profit participants (speculation) the difference in exchange rates.
There are the following types of currency markets.
In the field of distribution exchange market estimate in terms of breadth of coverage:
• International market - a global market in which the co-regional and domestic currency markets, the operations with currencies that are widely used in international payments.
• Regional currency market - a territorial market in which countries in the area of action agreed common rules of the currency market. Now release Asian, European, American regional markets.
• National (or inside) the foreign exchange market is organized around the country. Because of differences in levels of development within each territory may set rules for the internal currency market.
As regards exchange restrictions currency markets considered in terms of the presence or absence of the control on the functioning of these markets:
• Free currency market - a market in which no currency restrictions. In exchange restrictions, usually refers to a system of state measures for establishing rules of conduct in the foreign exchange market.
• Nesvobodnyy foreign exchange market - a market with currency restrictions.
For types of exchange rate markets are divided in terms of establishing the existing system applicable exchange rates on the currency market
• Real one exchange rate regime - is a free currency market exchange rates, that is. with floating rates, quotations are set for exchange trading.
• Foreign exchange market dual mode - a market with simultaneous use of a fixed variable rate. The dual exchange rate regime is used as a measure of state regulation of capital movements between the domestic and international capital markets to demonstrate and to control and usually limit the impact of the international market on the economy of the state.
The nature of organization:
• foreign exchange market - a market in which foreign exchange transactions carried out in the form of monetary exchange.
• Vnebyrzhevoy dealers of organized currency market, who can be members and Currency Exchange. Dealers arrange buyers and sellers in a variety of communications.
1.2 History of the foreign exchange market
The emergence of international foreign exchange market was prepared objective process of international integration, as strengthening relations between states required the formation of suitable ratios of the currency.
During the 19th century, Europe lived era of the gold standard when all countries currency based on gold. The main owners of state gold reserves in the country were the central banks. Yimdelehyrovalos right to print bills that have solid gold support. The system of the gold standard differed high stability of monetary circulation, low inflation and low interest rates. If the existence of this system there was a sharp increase in industrial development limits of 19-20 centuries.
In the early 20th century there was a transition vidzolotomonetnoho dozolotodevyznomu standard. The key currency of the world monetary system was the British pound sterling. The Bank of England took the position of leading world financial center. Most transactions in international markets was carried out in pounds sterling, the pound was equivalent currencies of other countries (because of the gold parity).
The First World War had violated the prevailing balance in the world, large military spending contributed to the budget imbalance countries. As a result of the economic crisis of 1930 gold standard system was significantly damaged. After the Great Depression and to the abolition of the gold standard in April 1931 foreign currency significantly reduced. By the mid-1930s, London is considered the main financial center. In the heyday of the British Empire Pound was the main trading currency and was also used as a reserve currency. In 1930 in Basel (Switzerland) based Bank for International Settlements, the main purpose of which were international banking supervision and coordination of monetary policy in the currency markets. Bank practicing and support in case of temporary difficulties to prevent the bankruptcy of countries.
WWII more complicated situation in the field of international payments and liquidity.
This war marked the collapse of the pound because of the destruction of the British Empire and international confidence in the pound was undermined vnaslidokkontrafaktsyy (fake) lbs Germany. After the US entered the Second World War, the dollar gained widespread popularity and worldwide. Meanwhile, Europe and Japan had been cut off from the international market, namely the United States began to shape the future in the global economy and finance.
As a result of a compromise between the major powers - the victor was stvorenoBretton-Vudskaya system, in which prominent place given to the US dollar. The dollar was directly tied to gold, he is at any time able to share it. Other currencies were firmly tied to the dollar SShA.Bretton-Vudskaya system - a system firmly fixed parities, with key positions held by the US dollar. The stability of this system of currency stability SShA.Rasstroystvo shook the US balance of payments position of the US dollar exceeded the international market and stimulate demand for gold on the part of individual countries and France. US gold reserves declined rapidly. In the early 70's, he was only a few percent of the volume traded dollars. August 15, 1971
US President Nixon suspended the conversion of dollars into gold in official transactions with the central banks of other countries. However, revised estimates of gold. Its official price increased from 35 to 42 dollars per ounce, but the demand for gold in the private market was increasing rapidly. Approximately 2 years rozpochynalysya attempts to maintain a fixed exchange rate of the dollar in relation to gold, but market conditions dictate.
The need to reorient the global economy new common currency was an important prerequisite for the formation of the international currency market. In 1973 triumphed system of floating exchange rates. She also became the basis of new economic relations on the exchange.
Consequently, it is in 1973 began to take shape on a new market structure - the international currency market (Forex - ForeignExchange). The modern foreign exchange market in developed countries continues to develop in terms of domination floating exchange rates and the liberalization of national law regulating the monetary sphere (abolition of exchange controls).
The development of the global currency market due to the influence of two main factors - firstly, the liberalization of foreign exchange transactions, increasing the degree of openness of national markets, and secondly - the introduction of modern technologies in operations in the foreign exchange market. First, the crucial role played liberalization process.
The liberalization of the foreign exchange markets most States took place in two stages: first - early 1960s, it was expanding convertibility of national currencies for non-residents; second - from mid 70's to early 80's - could be the liberalization of the market and transactions residents. As for the foreign exchange markets and development and more "transition economy", the time they are at the stage of liberalization.
The starting point of modern technological upgrading in the global currency market can be considered a transition to electronic technologies. The beginning of this process put news agency Reuters, which launched in 1981 the first elektronnudylynhovuyu system.
The emergence of electronic systems in the foreign exchange market to satisfy the needs of the foreign exchange market with a sharply increased volume of operations on servicing the movement of capital between the developed countries. It coincided with the development of domestic financial markets, the expansion of access to national markets by non-residents and the increased participation of its operations - the sale of securities national markets. New generation of electronic systems make it possible to trade from remote terminals automatically confirm agreement to direct information system verification currency positions and risk management.
The next step to enhance its operations in the global foreign exchange market was the use of electronic brokerage systems. They appeared in the early 90's and have received development by connecting them to the medium and small banks that have begun to conduct operatsiyikuply / sale currency.
The use of electronic dealing and brokerage systems largely determined the development of the global currency system rynku.Ynformatsyonno-torhovye leading Western banks, interconnected electronic systems actually created global interbank foreign exchange market transactions which are carried out 24 hours a day.
International market FOREX unites all participants a lot of foreign exchange transactions, individuals, firms, investment institutions, banks and central banks. The main currencies, which have to share the bulk of all transactions in the market FOREX, today is the US dollar (USD), euro (EUR), US Dollars (> JPY), Swiss franc (> CHF) and British pound (> GBP).
1.3 The global currency market FOREX and actors
FOREX - the largest market in the world, it is for up to 90% of the world market. Thousands of participants in this market - banks, brokerage firms, investment funds, financial and insurance companies - for 24 hours a day buy and sell currency concluding an agreement within a few seconds anywhere in the world. Combined into a single global network of satellite communication channels with the help of the most sophisticated computer systems, they create a turnover of currency funds in the amount of ten times during the year exceeds the total annual gross, national product of all countries.
The need to move such huge masses of money on electronic channels that exchange transactions provide economic relationship between participants of different markets that are on different sides of the state border, inter-state calculations, transactions between companies of different countries for their goods and services, foreign investment International tourism and business travel. Money is a tool officials themselves become a commodity as demand for each currency transactions in various business centers varies in time, therefore, changes and price of each currency. The international currency unit is a floating exchange rate, currency determines the price above the market.
Foreign exchange market consists of two main components: a stock market trade and OTC currency market, which is actually the interbank. In accounting for the bulk of operations carried out on the FOREX.
FOREX is not a "market" in the traditional sense. He has no single center has no specific place of trade, such as currency futures. Trade goes through the telephone and through computer terminals simultaneously in hundreds of banks around the world. Hundreds of millions bought and sold every few seconds, which is the essence of the so-called currency trading.
The main participants in the FX market are: commercial banks, currency exchanges, central banks, firms engaged in foreign trade, investment funds, brokerage firms, private persons.
Consider the major market players:
Commercial banks
They spend the bulk of foreign exchange transactions. In banks hold accounts of other participants market and carry with them the necessary conversion and deposit-credit operations. Perhaps Banks accumulate (through client operations) market demand for comprehensive valyutnyhkonversyyah, as well as attracting / placing funds
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