Question

Describe the major participants in the foreign exchange market and their objectives.

Answer 1

The different types of participants in the forex markets are as follows :-

1. Banks - banks have a wide role in affecting inflation and interest rates. They trade biliions of dollars of foreign exchange on a daily basis and are essentially the market makers. They provide bid ask quotes for currency pairs at all times.

2. Brokers - brokers are essentially the intermediaries which provide the best bid ask quotes to their clients from different dealers and help them executing trade. They make profits with commission

3. Speculators - speculators are Market participants that buy and sell forex with an aim of just earning profits by finding inefficiency in the markets.

4 . Hedgers - hedgers are market participants which take opposite position in the financial forex trades with an ain to prevent losses in the event of forex moments

5. Central banks - central banks like fed trade intensive in the forex market with an aim to prevent currencies from excessive devaluation or appreciationz

6. Retail participants - they trade in the markets for BAU requirements like buying in products, travelling or the students which are going to study abroad