Investment Decisions in Exchange Rates

 

The Foreign Exchange Market

 

The market for foreign exchange is the world's largest financial market. Trading is conducted through an “over-the-counter” network of traders from major commercial and investment banks linked by phone, computer terminal and other telecommunications devices.  Major trading centers include London, New York and Tokyo, with total trading volume in excess of $1.25 trillion dollars of foreign currency per day.  More than half of all trading directly involves the exchange of dollars.  Participants include importers and exporters, as well as traders, portfolio managers and foreign exchange brokers. The importance of trading other currencies against U.S. dollars arises from the fact that currency dealers quote other currencies against the dollar when trading among themselves.