Question

i dentify and write short on four the market participants in the foreign exchange market

Answer 1

Foreign exchange market participants:

• Central banks: these banks hold the currency reserves of their domestic currency as well as their trading partners. Moreover the efforts of the central banks to manage the domestic economic performance by monetary policy that includes raising or lowering the short term interest rates has powerful effect on currency prices.
• Global FX banks: a small number of global banks sit atop the FX market paradigm. They deal with central banks, major corporations & fund managers. They also provide pricing on large FX trades as well as economic & market commentary & expertise in executing & clearing trades in major & emerging market currencies throughout the world.
• International companies: these companies doing business internationally are considered to be important foreign exchange market participant. We can take an example. For example, if Atlanta based coca cola wants to sell a product in UK they trade pounds for dollars to repatriate it back to US.
• Retail traders: these people are individuals who trade their own money with a view to make profits. They make a significant & fast growing proportion of the FX market.
• Fund managers: fund managers are active foreign exchange traders. They access the market to acquire foreign currencies to fund cross border investments. For example, the purchase of shares in Tokyo requires a US-based investment manager to have the correct sum of Japanese yen in an account in order to settle the stock transaction. Depending on their FX market view, the fund manager might seek to hedge the currency risk that comes with holding an overseas investment. The manager would enter into a swap or forward FX trade to lock in the current USD/JPY rate into the future. Some fund managers, especially hedge funds, are also very active speculators in the foreign exchange markets.