Foreign exchange transaction is the exchange of one country's currency with another. Different from other financial markets, the foreign exchange market has no specific location and no central exchange, but transactions between banks, enterprises and individuals through electronic networks. "Foreign exchange trading" means buying one of a pair of currencies at the same time and selling the other.
The foreign exchange market, also known as the "foreign exchange" or "FX" market, is the largest financial market in the world, with an average of more than 65,438+0.5 trillion US dollars circulating in it every day-equivalent to more than 30 times the total transaction volume of all securities markets in the United States. Classification of foreign exchange transactions
From the nature and types of transactions, foreign exchange transactions can be divided into the following two categories:
Basic foreign exchange transactions to meet customers' real trade and capital trading needs;
On the basis of basic foreign exchange transactions, foreign exchange derivatives transactions are conducted to avoid and prevent exchange rate risks or for foreign exchange investment and speculative needs.
The basic foreign exchange transactions belonging to the first category are mainly spot foreign exchange transactions, while foreign exchange derivatives transactions include forward foreign exchange transactions, foreign exchange selective transactions, swap transactions, swap transactions and so on.
There are two main reasons for foreign exchange transactions. About 5% of daily transaction turnover is due to companies and government departments buying or selling their products and services abroad, or having to convert the profits they earn abroad into their own currencies. The other 95% transactions are for profit or speculation.
For speculators, the best trading opportunity is always to trade the most frequently traded (and therefore the most liquid) currencies, which are called "major currencies". Today, about 85% of daily transactions are conducted in these major currencies, including US dollar, Japanese yen, Euro, British pound, Swiss franc, Canadian dollar and Australian dollar.
This is a real-time 24-hour trading market. Foreign exchange trading starts from Sydney every day. With the rotation of the earth, the business days of every financial center in the world will start in turn, first in Tokyo, then in London and new york. Different from other financial markets, investors in foreign exchange trading can respond to foreign exchange fluctuations caused by economic, social and political events, whether during the day or at night.
The foreign exchange trading market is an over-the-counter (OTC) or "in-bank" trading market, because in fact, foreign exchange transactions are reached by both parties through telephone or electronic trading network. Unlike the stock and futures markets, foreign exchange transactions are not concentrated in one exchange.
Foreign exchange transactions can be divided into cash, spot foreign exchange transactions, contract spot foreign exchange transactions, forex futures trading, foreign exchange options transactions, forward foreign exchange transactions, swaps and so on.