Foreign Exchange Market
5paisa Research Team
Last Updated: 26 Feb, 2025 08:45 PM IST

Content
- What is Foreign Exchange Market?
- How does Foreign Exchange Market work?
- What are the Different Types of Foreign Exchange Markets?
- What are the Advantages and Disadvantages of Foreign Exchange Markets?
- Features of the Foreign Exchange Market
- Who are the Participants in a Foreign Exchange Market?
- What Factors Influence the Foreign Exchange Market?
- What is the Real Effective Exchange Rate (REER)?
- How Does the Foreign Exchange Market Affect the Economy?
- What Causes Exchange Rates to Fall?
- History of Forex
The foreign exchange market or the forex market, is the largest and most liquid financial market in the world. It is where different currencies are bought and sold, with the exchange rate determining the value of each currency relative to another. The forex market plays a critical role in facilitating international trade and investment, as well as providing opportunities for individuals and institutions to profit from fluctuations in currency values.
The forex market operates 24 hours a day, 5 days a week, with trading volumes exceeding $6 trillion per day. It is a highly decentralized market, with no single entity controlling the exchange rates or setting the prices of currencies.
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Frequently Asked Questions
The forex market is the largest financial market in the world, with an average daily trading volume of over $6 trillion, making it highly liquid and accessible to traders around the clock.
The foreign exchange market in London is considered the largest in the world, accounting for over 40% of the daily global forex trading volume.
An increase in demand for a country's currency relative to other currencies can increase its exchange rate, as can higher interest rates, stable political conditions, and strong economic growth.