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What is forex?

Foreign exchange

The banking act defines exchange as sending money to another place without cash movement. In short, exchange stands for the remittance whether domestically or overseas. Generally speaking, the word, exchange, represents foreign exchange, so called, forex on TV news.

The forex means the remittance to each other between different two currencies, as accompanied with the relevant cash movement beyond the border. You might change your domestic money into foreign currency in advance when you go abroad. The exporters like automakers need to change the foreign currency arising from sales activity overseas into domestic currency, and the importers like oil wholesalers need to buy US dollar for the payment of foreign debts thereafter. These cases are all called as forex transactions.

Domestic exchange

Forex related to daily life

Take a price of hamburger. It is almost made of beef, lettuce, pickles and wheat. These ingredients are all coming from the foreign countries. It is said to cost over 100 billion in Japanese Yen for purchase of materials, and 20% of the expense is related to forex market directly. That means it causes the unexpected forex gain or loss over 200 million Yen if the forex rate moves by 1 big figure. You will make out how closely the forex market is relating to the hamburger.

How about the gasoline? The retailing price of gasoline is changing every day as you can take a look at gas station. The gasoline is affected by forex movement but crude. Even if the crude price is going up in US dollar, the gasoline price in Japanese Yen becomes difficult to rise so long as the USD-JPY rate is going down. It occurs the gasoline price is going down according to forex movement despite of higher crude.

So, it is most important where the forex market is going. The forex rate is fixed time after time in the interbank market. Basically, the forex market will go up when the willingness to buy is stronger than that to sell and vice versa. The banks take part in the forex market as market makers, and they are always quoting forex prices based on their own position and the market requirement.

The forex market collects the world wide interest to trade, and the money has trend to focus on the attractive nations. The words, forex rate, Yen appreciation and Yen deprecation indicate how much the Japanese' wealth is worthy in comparison to foreign ones.

Forex movement like natural hazard

Forex market never sleeps during 24 hours all over the world. Many participants would buy or sell at any time and the forex rates are fixed in order. The forex market becomes so big as not to manipulate artificially even if any intentions. The forex market moves on global economy, monetary policy and other factors. No one can predict any forecast, which is like natural hazard. For this reason, the forex market is said to be free, fair and clean.

Main factors

 

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