Forex

It is primarily traded through banks, brokers, dealers, financial institutions and private individuals. Trades are executed through phone and increasingly through the Internet.It is only in the last few years that the smaller investor has been able to gain access to this market. Previously, the large amounts of deposits required precluded the smaller investors. With the advent of the Internet and growing competition it is now easily in the reach of most investors.

Marketiva MM DOO is a limited liability company incorporated in the Republic of Montenegro with registration number 5-0557722. Because over-the-counter market-making services are not within regulatory framework of the Securities Commission of the Republic of Montenegro (SCMN), Marketiva MM DOO is currently working with legal and compliance firms based in the EU to make its services fully compliant with the Markets in Financial Instruments Directive (MiFID), which is a EU law that provides harmonized regulation for financial services across the EU member states. In addition, Marketiva MM DOO is working on an autonomous web site that will present comprehensive self-regulatory information, and which will allow our clients to continuously monitor financial condition of Marketiva MM DOO and be able to submit complaints. ...Client funds held with Marketiva MM DOO are maintained in separate bank accounts at CKB AD, which is the largest commercial bank in Montenegro. Our over-the-counter market-making services and related online support are continuously available .

Banks in Nepal

Commercial banks plays vital roles to collect money in the state. Generally, commercial banks are required by the central bank to earmark a portion of their loan portfolio to priority lending for agriculture, cottage industry, services etc., which includes 0.25% to 3% to the deprived sector (poor population). Under this obligation, commercial banks can lend directly to individuals or self-help groups, charging a 6-7% interest rate, or provide wholesale funds or equity to microfinance providers serving the poor in Nepal.
Two thirds of the priority and deprived sector lending and investment are provided by the two public commercial banks, Nepal Bank Limited and Rastriya Banijya Bank. Until recently the priority lending was set at 12% of the loan portfolio. It is now being phased out, ending completely in 2010, while the 3% deprived sector requirement will stay in place, and therefore loan and investment in microfinance with it. As of mid July 2003, Rs.22,605 million were affected to the priority sector, while Rs. 3,563 million allocated to deprived sector lending, from which 132.6 million was in the form of equity. Under this requirement, investments made by commercial banks in the Rural Microfinance Development Center, an apex organization providing wholesale fund to microfinance, can be seen as a new link between the formal finance sector and microfinance.

Business: The Economy Trillions in currency trading

Monday, October 19, 1998 Published at 15:46 GMT 16:46 UK Business: The EconomyTrillions in currency trading Currency traders doing $1.5 trillion in daily business Average turnover on the world's foreign exchange (forex) markets reached almost $1,500bn a day in April this year, according to the Bank for International Settlements (BIS).
The volume of forex trading is far greater than the size of foreign currency reserves held by any country.
The size of forex trade has played its part in the currency crises of emerging nations over the past year.
The exact figure, $1,490bn, or $1.49 trillion, is 26% higher than when the BIS, which represents central banks, last measured flows in 43 different countries three years ago.
Centred in London
Almost a third of all forex trading occurs in London, by far the world's largest centre, with New York and Tokyo second and third.
US dollar and yen most tradedAt current values, transactions involving US dollars on side of the trade accounted for 87% of forex business. The Japanese Yen was the second-most traded currency.
However, less than half the transactions were simple 'spot' deals, the immediate purchase of currency for commercial transactions.
Most forex trading is on the futures market where currency buyers undertake to buy at a set price at a specified date in the future.
Futures gambling
Foreign exchange futures allow companies to plan their import, export and foreign investment operations with the certainty of knowing what will be the value of the currencies they trade in.
George Soros: forex speculatorHowever, increasingly the forex futures market is home to rich individuals and 'hedge funds' who speculate against currency movements attempting reap windfall gains.
George Soros is the most high-profile example of such currency speculators.
The advent of the euro next year is expected start to stem the sharp increases in forex dealings as eleven European currencies consolidate into one over the next three years.
Global crises
The figures shed some light on how financial crises began in emerging economies over the last year.
The ability for massive daily foreign currency flows to take place made possible the almost overnight collapses of the currencies of countries like Thailand, Indonesia and Russia.
As confidence in the economies of these countries fell away, demand for their currencies fell as investors took their capital out or stopped bringing it in.
Governments had tried to buy their own currencies to underpin their value but couldn't keep up with the sellers.
When they stopped their own forex activity, the forces of demand and supply saw the baht, rupiah and rouble in turn crash in value deepening the crisis of confidence and economic slowdown.
Speculators constantly watching for these market developments hastened the process.

Forex.com UK LTD

FOREX.com UK Ltd is a trading name of GAIN Capital - FOREX.com UK Limited, a subsidiary of GAIN Capital Holdings, Inc. GAIN Capital is a global leader in foreign exchange trading, serving retail and professional clients in over 140 countries worldwide through its direct and partner brands, and supporting average trade volume of nearly $200 billion per month. With FOREX.com UK, you have 24 hour access to the global foreign exchange market, plus powerful charting tools, expert market research and commentary, and advanced forex trading tools. We also offer a wealth of education and training, covering everything from getting started in forex to understanding technical analysis and developing a trading strategy. Register for a practice account today to see for yourself.

Forex Trading Systems

Forex trading systems are very popular as a method of investing money to make more money. Forex trading is all about putting your money into another currency for long or short term to earn more money. Many forex trading systems are based on how a stock exchange works. What you will find is that a forex trading system will permit you to invest at your currency rate, have your currency changed to another currency and then invest in a company that is foreign to your own country. A forex trading system is built upon worldwide investors, and worldwide companies, as well as world wide currencies. A forex trading system online A forex trading system online will give you the same results as a forex trading system offline, but you can access and see your money faster. You can invest, move, trade, and remove your money faster online with a forex trading system than you can offline, while you wait for paperwork to be completed. Forex systems are going to build wealth for investors who are willing to take the time to learn about their investments, and who are going to trust their brokers to make additional decisions. What type of forex trading system or broker should you trust? As with any investment company or trading system, you want to be able to trust who you are dealing with. If you can’t reach the forex trading system representative when you want by phone, by fax, in person, or even by email you are working with the wrong company. A company that uses forex trading systems and gives you opportunities to world wide investments should be able to communicate with you during various times of the business day. In addition, you want to work and invest with a forex trading system company that will put your money first, that will listen to what you want to do, and how you want to do it. Forex trading companies that are calling you all the time, that give you very little room to make decisions and that are considered to be pushy in your mind, is the forex trading systems company you should avoid doing further business with. Any investment company should realize you, as the consumer and end user for any trading system, should be able to take your time and learn about any investment before making that investment. If a forex trading system representative calls you and asks for large sums of money, that you need to get involved in this action right now, you should be suspicious. Any broker or forex trading consultant should give you time, and their best information, not demands on your time and money. Search for a forex trading system you are comfortable with before investing money.

About Brokers

Most clients eventually spend more cash on the market than they gain. Major causes of this phenomenon are the clients' low level of training, their emotional volatility, and lack of familiarity with foreign languages. The clients tend to not pay attention to the global events. Based on this fact, the "kitchen" method was born. Under this technique, the forex brokers take for granted that the client will lose money.
The forex broker acts as a liaison of the client to the forex market. The broker guides the client on the methods of trade. Just like a stock broker, a foreign exchange broker will provide technical analysis and research of the market situation. The information is supposed to increase the client's profit.
Financial companies are able to affect the forex market the most due to high number of large transactions they do. Before the emergence of the Internet, banks were the only organizations with access to forex. Now, however, practically anyone can enter the market at any time through a broker.
A client picks a forex broker based on his own particular needs. For novices, one type of online firms, or houses, exists, which gives them comprehensive instructions on the use of the trading tools, as well as market studies. A new user can also trade using virtual money so as to not risk their actual capital. Other houses service practiced traders by giving them deeper research as opposed to trading directions. A trader tends to try a number of houses before making a decision.
"Setting the spread" is one of the ways how Forex dealers gain profit. The spread is the distinction between the price of bought and sold currency. Forex deals are performed with high leverage, at about 100, different from stocks. So if the dealer invests $1000 he or she controls $100,000, and can raise his benefit according to the sum. The so-called mini-Forex, used by many brokers makes possible for individuals to enter this market easily. The minimum deposit of mini-Forex is $100.
Three main orders are widely spread for entries. They are: Market orders, Stop orders, and Limit orders. You should check the dealer you will be working with for a list of the possible order types as not all of the orders are always easily available. Entering Forex market you usually try to entrust your capital to a professional, diligent and responsible Forex brokers, who will be your mediators. Using their broad experience and good knowledge these mediators do everything for making your capital grow - but surely not for free.

What is Forex

Foreign Exchange (FOREX) is the arena where a nation's currency is exchanged for that of another. The foreign exchange market is the largest financial market in the world, with the equivalent of over $1.9 trillion changing hands daily; more than three times the aggregate amount of the US Equity and Treasury markets combined. Unlike other financial markets, the Forex market has no physical location and no central exchange (off-exchange). It operates through a global network of banks, corporations and individuals trading one currency for another. The lack of a physical exchange enables the Forex market to operate on a 24-hour basis, spanning from one zone to another in all the major financial centers. Traditionally, retail investors' only means of gaining access to the foreign exchange market was through banks that transacted large amounts of currencies for commercial and investment purposes. Trading volume has increased rapidly over time, especially after exchange rates were allowed to float freely in 1971. Today, importers and exporters, international portfolio managers, multinational corporations, speculators, day traders, long-term holders and hedge funds all use the FOREX market to pay for goods and services, transact in financial assets or to reduce the risk of currency movements by hedging their exposure in other markets. MG Financial, now operating in over 100 countries, serves all manner of clients, comprising speculators and strategic traders. Whether it’s day-traders looking for short-term gains, or fund managers wanting to hedge their non-US assets, MG's DealStation™ allows them to participate in FOREX trading by providing a combination of live quotes, Real-Time charts, and news and analysis that attracts traders with an orientation towards fundamental and/or technical analysis.

Dollar Reverses Course

A recent WSJ headline reads, Good Economic News Threatens the Dollar, and summarizes the Dollar’s trading pattern as follows: “Demand for the U.S. currency continues to erode amid a tide of more encouraging economic data and corporate earnings that have fed a thirst for riskier assets such as stocks, commodities, and growth-sensitive currencies.”
Less than two weeks after that article was published, the Dollar rose by a healthy 2% against the Euro in only one trading session, as US labor market conditions improved slightly: “The U.S. unemployment rate fell in July for the first time in 15 months as employers cut far fewer jobs than expected, giving the clearest indication yet that the economy was turning around from a deep recession.” While technically another 250,000 jobs were lost and economists forecast that the employment rate will rise past 10% before peaking, investor sentiment is still at a high.Unsurprisingly, the news triggered a stock market rally. More noteworthy, though, is that the Dollar also rallied. Since the beginning of 2009 and especially since the beginning of March, there has been a clear negative correlation between stocks and the Dollar, as a result of risk appetite. “At one point this year, the correlation between the euro-dollar rate and the S&P 500 index hit 50 percent, according to BNP Paribas calculations. That is, the euro and S&P 500 rose or fell in tandem half the time.”
This latest development suggests that this relationship has broken down, at least temporarily. Argues one analyst, “The dollar’s going to turn. The U.S. economy is more able to withstand shocks than other economies, especially Europe.” Perhaps going forward, the markets will be driven less by risk appetite and more by comparative growth trajectories and economic fundamentals.
Not so fast, though. Much of the Dollar’s recent slide has been a product carry trading patterns, as investors borrow in low-yielding Dollars and invest in higher-yielding alternatives. An improvement in economic conditions could compel the Fed to hike rates, which would seriously dent the attractiveness of the carry trade. “Indeed, long-dated U.S. interest rates have been quietly moving in the dollar’s favor while U.S. interest rate futures on Friday started pricing in a federal funds rate of 1.25 percent by the mid-2010, the highest since June.” Based on this paradigm, then, it’s still risk appetite that’s driving the Dollar, whether up or down.

Fed To Hold Rates For The Near Team

Over the last week, the markets have been abuzz with chatter about how the US recession will soon come to and end, followed by a quick and healthy recovery. According to investor logic, the result would be a rise in inflation and interest rates. This optimism was partially deflated today, as the Federal Reserve bank conducted its annual monetary policy meeting.
Excluding a brief uptick in June (see chart below courtesy of the Cleveland Fed), investors had long come to expect that the Fed would leave its benchmark Federal Funds rate unchanged, at 0-.25%. At the same time, there was a strong belief that the Fed would begin to hike rates at the end of 2009, and comment accordingly in the press release that accompanied its monetary policy decision. Barron’s predicted yesterday: “The statement will acknowledge some improvement in the U.S. economy, though it will imply that this nascent growth reflected in recent gross domestic product reports is fragile and will be monitored closely. This will leave open the specter that interest rates could be increased at some point in the future.”

Sure enough, the Fed left rates unchanged, and its press release conveyed a restrained sense of hope that the worst of the recession is now behind us: “Information received since the Federal Open Market Committee met in June suggests that economic activity is leveling out. Conditions in financial markets have improved further in recent weeks…Although economic activity is likely to remain weak for a time, the Committee continues to anticipate…a gradual resumption of sustainable economic growth in a context of price stability.” The Fed also announced that its Treasury buying activities would soon come to an end, although it may continue to buy mortgage securities as part of its quantitative easing program.
Perhaps the tone of the press release was slightly less positive than investors would have liked, since interest rate futures dived immediately on the news. Especially compared to last week, investors are now assuming that it will be a while before the Fed actually hike rates: “At Wednesday’s settlement price of 99.655, the February fed-funds futures contract priced in about a 38% chance for a 0.5% funds rate after the late-January meeting. That’s down sharply from about a 60% chance at Tuesday’s settlement, about a 76% chance at Monday’s settlement, and about a 96% chance at last Friday’s settlement.” Analysis of options trading activity reveals that the large brokerage houses believe similarly.
As for the Dollar, it now seems possible that last week’s rally was premature. If the Fed isn’t prepared to hike rates anytime soon, then the current interest rate differentials between the US and the rest of the world will remain intact. More importantly, the Dollar will remain a viable funding currency for carry trades, and the shift of funds into higher-yielding alternatives will probably continue for the time being.

The Foreign Exchange Market

The foreign exchange market (currency, forex, or FX) trades currencies. It lets banks and other institutions easily buy and sell currencies.
The purpose of the foreign exchange market is to help international trade and investment. A foreign exchange 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 foreign exchange transaction a party purchases a quantity of one currency by paying a quantity of another currency. The modern foreign exchange market 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 foreign exchange market is unique because of
its trading volumes,
the extreme liquidity of the market,
its geographical dispersion,
its long trading hours: 24 hours a day except on weekends (from 22:00 UTC on Sunday until 22:00 UTC Friday),
the variety of factors that affect exchange rates.
the low margins of profit compared with other markets of fixed income (but profits can be high due to very large trading volumes)
the use of leverage

Foreign Trade

The Foreign Exchange Joint Standing Committee (FX JSC) was established in 1973 under the auspices of the Bank of England, in the main part as a forum for banks and brokers to discuss broad market issues and the focus of the Committee's regular work remains issues of common concern to the different participants in the foreign exchange market. The Bank of England provides the Committee's Chairman and Secretary: they can be contacted on 020 7601 5982.One of the main responsibilities of the Committee is to maintain the Non-Investment Products Code. This is a voluntary code of good market practice which covers bullion, wholesale deposits as well as the FX market. It is maintained in conjunction with the Sterling Money Markets Liaison Group, the London Bullion Market Assosciation, and certain trade associations.The Committee includes senior staff from many of the major banks operating in the foreign exchange market in London, as well as from voice- and electronic-brokers, corporate users of the foreign exchange market, the Financial Services Authority (FSA) and representatives from the British Bankers' Association, the Association of Corporate Treasurers and the Wholesale Market Brokers' Association.The Bank of England's framework for its operations in the sterling money markets is designed to implement the Monetary Policy Committee (MPC)'s interest rate decisions while meeting the liquidity needs, and so contributing to the stability of, the banking system as a whole.The Bank of England is the sole issuer of sterling central bank money, the final, risk-free settlement asset in the United Kingdom. This enables the Bank to implement monetary policy and makes the framework for the Bank's monetary operations central to liquidity management in the banking system as a whole and by individual banks and building societies.The Bank's market operations have two Objectives, stemming from its monetary policy and financial stability responsibilities as the United Kingdom's central bank. They are:(i) To implement monetary policy by maintaining overnight market interest rates in line with Bank Rate, so that there is a flat risk-free money market yield curve to the next MPC decision date, and there is very little day-to-day or intraday volatility in market interest rates at maturities out to that horizon.(ii) To reduce the cost of of disruption to the liquidity and payment services supplied by commercial banks. The Bank does this by balancing the provision of liquidity insurance against the costs of creating incentives for banks to take greater risks, and subject to the need to avoid taking risk onto its balance sheet. The framework has four main elements:Reserves-averaging scheme. Eligible UK banks and building societies undertake to hold target balances (reserves) at the Bank on average over maintenance periods running from one MPC decision date until the next. If an average balance is within a range around the target, the balance is remunerated at Bank Rate. Operational Standing Facilities. Operational standing deposit and (collateralised) lending facilities are available to eligible UK banks and building societies. They may be used on demand. In normal circumstances, the lending / deposit rates are 25bp higher than Bank Rate and 25bp below Bank Rate respectively. A Discount Window Facility. This is a facility to provide liquidity insurance to the banking system. Eligible banks and building societies may borrow gilts, for up to 30 days, against a wide range of collateral in return for a fee, which will vary with the collateral used and the total size of borrowings. OMOs. Open market operations (OMOs) are used to provide to the banking system the amount of central bank money needed to enable reserve-scheme members, in aggregate, to achieve their reserves targets. OMOs comprise short-term repos at Bank Rate, long-term repos at market rates determined in variable-rate tenders and outright purchases of high-quality bonds.

Importance of forex.

Summary Outlook: On Friday, October 3rd, at 0830ET/1230GMT, US September employment data will be released. We expect the headline NFP number will come in roughly in line with consensus forecasts of -105K, but think the unemployment rate may edge up to 6.2/6.3% versus market expectations of a steady 6.1% unemployment rate. The risk is that the headline NFP shows a larger drop in jobs, potentially owing to strike- or hurricane-related adjustments. Interim economic data (weekly claims, labor differential in Consumer confidence report, ISM manufacturing employment dropping from 49.7 to 41.8) have shown a deterioration in overall labor market conditions, so the risks are clearly skewed to a weaker NFP. We would not be surprised by a NFP job loss of -150/-170K. And be alert for a negative revision to August NFP. But the NFP report is not the only show in town tomorrow, as markets will anxiously be watching to see if the US House can pass the financial sector rescue package. We are highly optimistic that additions to the Senate-passed bill will lead to the bill's passage, and we think this will be greeted enthusiastically by investors. The result could be a significant rally in stocks and a rush to riskier assets, which in FX means buying of JPY-crosses (e.g. EUR/JPY or AUD/JPY). The rescue package may also alleviate credit market strains, reducing demand for USD from bank funding needs. Trading Strategy: Because we think the risks are skewed to a weaker NFP reading, we anticipate an initially negative USD reaction. But we think USD strength this week is likely to see heavy buying of USD on such weakness, leading to a short-term reversal of the initial reaction. From then, we look for JPY-cross buying to materialize based on the prospect of House passage of the rescue bill. If correct, such buying should put a floor under non-JPY dollar pairs, like EUR/USD and GBP/USD. The rest of the session could then see a grind higher in the JPY-crosses, sending EUR/USD, GBP/USD and AUD/USD higher on the day, aided by week-end short-covering in EUR/USD/profit-taking on long USD positions. In concrete terms, a NFP reading of between -100K/-150K could see EUR/USD jump higher by 60-90 pips from pre-release levels, followed by heavy selling then sending the pair down 100-120 pips from its post-NFP reaction high. From there, we then expect that short-covering and outright buying of EUR/JPY will see EUR/USD grind higher. We will be closely watching a long-term trend line that guided the EUR higher since early 2002, currently at 1.3910/30 area. We would stop out (exit) of long EUR/USD positions if it trades below 1.3710/20, roughly 30 points below today's low. We think a short-squeeze higher in EUR/USD is likely on strength over 1.3950/60. Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

ICAP probes suspected forex fraud

The three ICAP staff are among 47 currency traders arrested in a high-profile swoop by the FBI last week.
ICAP said the trio had not traded on the firm's behalf, and added that its own finances appeared unaffected.
"I believe this to be just an isolated incident of three individuals," said ICAP chief executive Michael Spencer.
"I hope that the issue is resolved rapidly."
The lawyers hired by ICAP, an interdealer broker, are to investigate the full extent of the employees' alleged activity.
Arrests
The 47 currency traders detained in the FBI raid were later charged with a range of criminal offences, including fraud.
They include bank staff accused of taking kickbacks to rig transactions so that their employers would lose money, and "boiler room" operators who allegedly sold worthless investments to unsuspecting members of the public.
The FBI swoop netted employees of one other UK brokerage - Tullet Libery, a subsidiary of Collins Stewart - as well as staff at big name Wall Street banks including JP Morgan Chase and UBS.
The companies themselves are not under investigation.
ICAP's announcement came as it unveiled a 47% increase in first half pre-tax profits, and said it was confident of further growth in the month ahead.
"Market conditions remain good for ICAP, and our overall position is very strong," Mr Spencer said.
ICAP shares closed up 5p at £13.85.

Reserve Bank Governor

Reserve Bank Governor Gideon Gono told state media that its abuse had led to high black market prices.
Zimbabwe is facing an economic crisis with a chronic shortage of fuel and basic food stuffs.
Meanwhile, a government minister has warned financial institutions against lending to white farmers in case they are farming "illegally".
Some 4,000 white farmers have been evicted from their land since a controversial land reform programme began in 2000.
Land has been redistributed to some 150,000 black farmers but agricultural production has halved.
Apology
Mr Gono said the foreign currency coupon system, where certain garages accepted payment in foreign currency had initially worked well, but it had only ever been intended as a temporary measure, to reduce queues.

Robert Mugabe blames Zimbabwe's problems on a western plot"Some members of the public started to abuse the facility and used it for speculative and parallel market activities, thus militating against its main objective," he told the Sunday Mail newspaper.
He said he regretted any inconvenience, but it was being scrapped "for the best interest of the wider economy".
In the same paper, Land Reform Minister Didymus Mutasa accused Mr Gono's Reserve Bank and unspecified financial institutions of getting into contract farming with white farmers without checking their status on the farms with his ministry.
He said before any loan can be extended to a white farmer, his ministry needed to be consulted.
Mr Mutasa claims new black farmers are being sidelined on the grounds that they do not have collateral support, while white farmers are perceived to have the capacity to repay as they have title deeds.
President Robert Mugabe has always accused western countries led by former colonial power Britain of sabotaging the economy because of opposition to land reform

Foreign Exchange

India is replacing a controversial foreign exchange law with a more liberal act so as to encourage outside investment.
The old Foreign Exchange Regulation Act (Fera), which has now been revoked, was disliked by traders and businessmen who frequently criticised what they termed its harsh provisions.
Fera came into existence in 1973, and since then many top industrialists and businessmen fell foul of its provisions.
Suspects accused of violating the law were often detained for questioning, and faced the prospect of a prison sentence if they were found guilty.
Deregulation
But under the new Foreign Exchange Management Act (Fema), which comes into force on Thursday, suspected foreign exchange violations are treated as civil rather than criminal offences.
India is attracting more foreign investmentFinancial experts say Fera was devised and implemented when India had a highly regulated economy, and when foreign investment was either not allowed or regarded with much suspicion.
All that changed in 1993, when India liberalised its economy and started to attract a lot more overseas investment.
Since then there has been a substantial increase in India's foreign exchange reserves.
Foreign trade has increased, tariffs have been curtailed and foreign institutions are allowed far greater access to its stock markets.
The new law, experts say, reflects the ongoing desire of the financial authorities to attract more foreign investment and promote exports.
However the authorities have made clear that although Fera is repealed, it still applies to offences committed before its abolition.
There are nearly 7,000 cases pending, some of which are in an advanced stage of investigation.
One of those being investigated for foreign exchange violations is the son of a former Prime Minister, P V Narasimha Rao.

Forex futures market

Average turnover on the world's foreign exchange (forex) markets reached almost $1,500bn a day in April this year, according to the Bank for International Settlements (BIS).
The volume of forex trading is far greater than the size of foreign currency reserves held by any country.
The size of forex trade has played its part in the currency crises of emerging nations over the past year.
The exact figure, $1,490bn, or $1.49 trillion, is 26% higher than when the BIS, which represents central banks, last measured flows in 43 different countries three years ago.
Centred in London
Almost a third of all forex trading occurs in London, by far the world's largest centre, with New York and Tokyo second and third.
US dollar and yen most tradedAt current values, transactions involving US dollars on side of the trade accounted for 87% of forex business. The Japanese Yen was the second-most traded currency.
However, less than half the transactions were simple 'spot' deals, the immediate purchase of currency for commercial transactions.
Most forex trading is on the futures market where currency buyers undertake to buy at a set price at a specified date in the future.
Futures gambling
Foreign exchange futures allow companies to plan their import, export and foreign investment operations with the certainty of knowing what will be the value of the currencies they trade in.
George Soros: forex speculatorHowever, increasingly the forex futures market is home to rich individuals and 'hedge funds' who speculate against currency movements attempting reap windfall gains.
George Soros is the most high-profile example of such currency speculators.
The advent of the euro next year is expected start to stem the sharp increases in forex dealings as eleven European currencies consolidate into one over the next three years.
Global crises
The figures shed some light on how financial crises began in emerging economies over the last year.
The ability for massive daily foreign currency flows to take place made possible the almost overnight collapses of the currencies of countries like Thailand, Indonesia and Russia.
As confidence in the economies of these countries fell away, demand for their currencies fell as investors took their capital out or stopped bringing it in.
Governments had tried to buy their own currencies to underpin their value but couldn't keep up with the sellers.
When they stopped their own forex activity, the forces of demand and supply saw the baht, rupiah and rouble in turn crash in value deepening the crisis of confidence and economic slowdown.
Speculators constantly watching for these market developments hastened the process.