There are over a hundred currencies in the world, all reacting constantly to national and international news and market forces. This built-in volatility makes the Forex market the most fluid in the financial world. It is also the largest, with trading taking place 24 hours a day, five days a week from Sunday afternoon through Friday afternoon. Even though only a few currencies - the American dollar, the Japanese yen and the euro - account for the bulk of the trading in the foreign exchange market, there are an average of more than five trillion trades per day.
Who is playing in this game? Is the Forex market a place for the individual investor to be?
Although its popularity is on the rise, few forex market trades come from individual investors in comparison with banks and financial institutions. The fundamentals of trading foreign exchanges are much like trading equities - you just need to apply them to countries and not companies.
Who is playing in this game? Is the Forex market a place for the individual investor to be?
Banks
Since their function is to handle money it is no surprise that banks are the biggest traders of foreign currencies. About half of all trades on the Forex market are executed among banks, a phenomenon known as "interbank trades." While many of these are performed as a service for customers with international business, a high percentage of transactions are speculative plays from the banks' own accounts, attempting to cash in on the short-term volatility of the Forex market.Central Banks
While investment bankers are the most ubiquitous traders in the forex market, it is the central banks that carry the most clout. These national money watchdogs possess the power to intervene with a currency, jiggling the value of a nation's money to maximize that country's economy on the world stage. This can be done to juice exports or reign in galloping domestic inflation for instance. A Forex trader needs to be ever vigilant in assessing the actions of a central bank.Hedge Funds
Hedge fund managers are the largest group of non-institutional investors in foreign currencies. Often they are trading currencies as part of an international portfolio for large accounts. But investment managers will also engage in speculative bets on the future values of another country's currency.Corporations
Multinational companies buying raw materials and selling products are entwined in the Forex markets. With so many foreign transactions taking place, companies can find themselves exposed to unnecessary risks involved in currency fluctuations. To counter these dangerous positions managers will trade on the Forex exchange to hedge against such risk.Although its popularity is on the rise, few forex market trades come from individual investors in comparison with banks and financial institutions. The fundamentals of trading foreign exchanges are much like trading equities - you just need to apply them to countries and not companies.
Editors’ Picks
EUR/USD looks vacillating around 1.1800
EUR/USD alternates gains with losses around the 1.1800 neighbourhood amid marginal gains at the end of the week. The pair’s tepid move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the irresolute price action in the US Dollar.
GBP/USD slips back to daily lows near 1.3450
GBP/USD trades on the back foot on Friday, adding to Thursday’s losses around the 1.3450 region. Cable’s move lower comes amid the lacklustre performance of the Greenback in a context of a wide spread absence of volatility.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD looks vacillating around 1.1800
EUR/USD alternates gains with losses around the 1.1800 neighbourhood amid marginal gains at the end of the week. The pair’s tepid move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the irresolute price action in the US Dollar.
GBP/USD slips back to daily lows near 1.3450
GBP/USD trades on the back foot on Friday, adding to Thursday’s losses around the 1.3450 region. Cable’s move lower comes amid the lacklustre performance of the Greenback in a context of a wide spread absence of volatility.
Gold flirts with four-week highs past $5,200
Gold adds to the ongoing recovery, up for the third day in a row and surpassing the $5,200 mark per troy ounce on Friday. The relentless uptick in the precious metal remains bolstered by steady geopolitical tensions and persistent uncertainty surrounding the US trade policy.
Bitcoin, Ethereum and Ripple consolidate with short-term cautious bullish bias
Bitcoin, Ethereum and Ripple are consolidating near key technical areas on Friday, showing mild signs of stabilization after recent volatility. BTC holds above $67,000 despite mild losses so far this week, while ETH hovers around $2,000 after a rejection near its upper consolidation boundary.
Changing the game: International implications of recent tariff developments
The Supreme Court ruling on International Emergency Economic Powers Act (IEEPA) tariffs provides limited relief for the rest of the world, with weighted average tariff rates modestly lower.
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