In principle anyone who exchanges currency of a given country for currency of another country participates in the foreign exchange market. However it is useful if we concentrate on the major actors in this market. Under any priority system commercial banks are the main participants in the foreign exchange market. Indeed one can say that it is the commercial banks that “make a market “ in foreign exchange. Next in importance are the large corporations with foreign trade activities or direct investment abroad. Finally central banks are omnipresent in the foreign exchange market.
Commercial Banks.
Obviously when we talk of the commercial bank as the leading actor in the foreign exchange scene we are speaking mostly of large commercial banks with many clients engaging in imports and exports which must be paid for in foreign currencies or of banks which specialize in the financing of trade.
Commercial banks participants in the foreign exchange market as an intermediary for their corporate customers who wish to operate in the market. They also operate on their own account.
Central Banks
These institutions are not only responsible for the printing of domestic currency and the management of the money supply (as well as all the other objectives of monetary policy ) but in addition they are often responsible for maintaining the value of the domestic currency vis-à-vis the foreign currencies. This is certainly true under the system of “fixed exchange rates”. However even within systems of “floating exchange rates “ the central banks have usually felt compelled to intervene in the foreign exchange market at least to maintain “orderly markets”.
Commercial Banks.
Obviously when we talk of the commercial bank as the leading actor in the foreign exchange scene we are speaking mostly of large commercial banks with many clients engaging in imports and exports which must be paid for in foreign currencies or of banks which specialize in the financing of trade.
Commercial banks participants in the foreign exchange market as an intermediary for their corporate customers who wish to operate in the market. They also operate on their own account.
Central Banks
These institutions are not only responsible for the printing of domestic currency and the management of the money supply (as well as all the other objectives of monetary policy ) but in addition they are often responsible for maintaining the value of the domestic currency vis-à-vis the foreign currencies. This is certainly true under the system of “fixed exchange rates”. However even within systems of “floating exchange rates “ the central banks have usually felt compelled to intervene in the foreign exchange market at least to maintain “orderly markets”.
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