Posted by on Oct 6, 2017 in Business and Finance | 0 comments

The Function of the Forex Market

What is forex? For most of us may not know much about the meaning of the word. Forex, in general, can be interpreted as a form of buying and selling one country’s currency against the currencies of other countries. Interestingly, today’s forex has become a very promising business field. For those of you who want to know more about forex, this article will provide a review of the understanding, function, and managed forex world players who hopefully can be additional useful information for you.

In the process, forex has some main functions that are very powerful to the perpetrators. The purpose of forex is classified into 3:

1. The first function is to simplify the process of currency exchange. As we know, in the daily economic activities of human beings sometimes require funds in the form of currency of other countries. Whether it’s used in travel, shopping, business, or storage. The currency exchange can be done with a system called Clearing. Well one of the functions of the forex itself is to provide such services. For clearness, examples of forex services that you usually meet in various places, ranging from banks to exchange of money in various places.

2. The second function is to do Hedging. This is an act that is usually done by a forex trader as a “guarantee” that the value of investment funds is not reduced or loss when he sells forex in 2 different markets. In this case also play the banks, both domestic banks, and foreign banks as US guarantor funds.

3. The third function is to conduct the arbitration. Arbitrage is basically the difference in interest rates of 2 different currencies. And arbitration is an act done to benefit from the difference in the currency itself. This is simply done by buying a currency that is low in value in a country and selling the currency in a country where the currency is high.

Comments are closed.

Share This