The main players in foreign exchange markets are as follows:
CUSTOMERS
The customers who are engaged in foreign trade participate in foreign exchange markets by availing of the services of banks. Exporters require converting the dollars in to rupee and importers require converting rupee in to the dollars as they have to pay in dollars for the goods/services they have imported.
COMMERCIAL BANKS
They are most active players in the forex market. Commercial banks dealing with international transactions offer services for conversion of one currency in to another.
They have wide network of branches. Typically banks buy foreign exchange from exporters and sells foreign exchange to the importers of the goods. As every time the foreign exchange bought and sold may not be equal banks are left with the overbought or oversold position. The balance amount is sold or bought from the market.
Nowadays, in international foreign exchange markets, the international trade turnover accounts for a fraction of huge amounts dealt, i.e. bought and sold.
The balance amount is accounted for either by financial transactions or speculation. Banks have enough financial strength and wide experience to speculate the market and banks does so. This is popularly known as the trading in the forex market.
Commercial banks have following objectives for being active in the foreign exchange markets.
They render better service by offering competitive rates to their customers engaged in international trade;
They are in a better position to manage risks arising out of exchange rate fluctuations;
Foreign exchange business is a profitable activity and thus such banks are in a position to generate more profits for themselves;
They can manage their integrated treasury in a more efficient manner.
In India Reserve Bank of India has given license to the commercial banks to deal in foreign exchange under section 6 Foreign Exchange Regulation Act, 1973, which are called the Authorized Dealers (ADs).
CUSTOMERS
The customers who are engaged in foreign trade participate in foreign exchange markets by availing of the services of banks. Exporters require converting the dollars in to rupee and importers require converting rupee in to the dollars as they have to pay in dollars for the goods/services they have imported.
COMMERCIAL BANKS
They are most active players in the forex market. Commercial banks dealing with international transactions offer services for conversion of one currency in to another.
They have wide network of branches. Typically banks buy foreign exchange from exporters and sells foreign exchange to the importers of the goods. As every time the foreign exchange bought and sold may not be equal banks are left with the overbought or oversold position. The balance amount is sold or bought from the market.
Nowadays, in international foreign exchange markets, the international trade turnover accounts for a fraction of huge amounts dealt, i.e. bought and sold.
The balance amount is accounted for either by financial transactions or speculation. Banks have enough financial strength and wide experience to speculate the market and banks does so. This is popularly known as the trading in the forex market.
Commercial banks have following objectives for being active in the foreign exchange markets.
They render better service by offering competitive rates to their customers engaged in international trade;
They are in a better position to manage risks arising out of exchange rate fluctuations;
Foreign exchange business is a profitable activity and thus such banks are in a position to generate more profits for themselves;
They can manage their integrated treasury in a more efficient manner.
In India Reserve Bank of India has given license to the commercial banks to deal in foreign exchange under section 6 Foreign Exchange Regulation Act, 1973, which are called the Authorized Dealers (ADs).