Foreign Exchange Market

Foreign Exchange Market

BUSI 604 - B07

February 20, 2016

Dr. James Korwall

Foreign Exchange Market

Key Term

I chose the term Foreign Exchange Market because I realize the impact globalization has on both America and the world marketplace, therefore the need and a method of exchanging foreign currency has never been greater. The Foreign Exchange Market (Forex) is interesting because in order to expedite trade between differing countries there is a need to convert currencies. Multinational corporations, such as the insurance company in which I work, invest money into varying markets around the world, which primes the need to exchange currency. I also find it interesting how much a currency can be worth in one nation, but when the currency is exchanged in the Foreign Exchange Market, the swing in value can be drastic.

Explanation of the Key Term

Economies are maintained by production systems that create goods, systems that distribute goods, and currencies that provide a medium for trade for the goods. The Foreign Exchange Market is an institutionalized entity where currency of one country is exchanged for the currency of another, which allows varying countries to conduct business. If there were no way to exchange dollar for dollar it would be impossible for countries to exchange currency as there would be no method to accurately convert currency. Until the 20th century, a majority of the world’s economies operated in a closed market or in a market that used the same currency, distribution methods, and institutions (Das, 2015). When the Foreign Exchange Market was developed, domestic markets became open due to the ability of exchanging currency globally.

Major Article Summary

The most intriguing article found on the Foreign Exchange Market was written in the Journal of International Financial Markets, Institutions, and Money. The article examines relationships among pressure and capital controls in the foreign exchange market, positive links with...