What controls the market?

The primary causes of changes in currency rates are economical forces as well as political and psychological factors.
Basic parameters of economy such as inflation, interest rates, unemployment, and many others affect exchange rates constantly and dramatically. Government policy has drastic influence on the rates too. Competence of the government in maintaining the currency is conducive for its rate increase. Decreasing interest rates stimulates decreased demand for the currency and, thus, depresses its value in the exchange operations. A decision of the Central Bank of a country to buy or sell the currency may strengthen or undermine its rate significantly.
Expectations of change in the economic conditions may lead to sudden and drastic fluctuation of the currency rate. This is the key concept, because the foreign exchange market is often controlled by expectation of changes, rather than the changes themselves.
Activity of professional currency exchange managers, especially when caused by the interests of powerful financial consortia, is another important market force. In many cases, the managers may act independently and use the market as a unique instrument to achieve their goals of changing major rates. Most, if not all of them, could not care less about the adequacy of charts used for technical analysis. Though, as major levels of resistance and support are approached, the behavior of the market becomes more and more "technical", and the reactions of large number of traders often become similar and predictable. Such periods in the market may lead to dramatic rate fluctuations, because significant funds happen to be invested in similar positions.

Trading characteristics

There is no unified or centrally cleared market for the majority of FX trades, and there is very little cross-border regulation. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currencies instruments are traded. This implies that there is not a single exchange rate but rather a number of different rates (prices), depending on what bank or market maker is trading, and where it is. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs instantaneously. Due to London's dominance in the market, a particular currency's quoted price is usually the London market price. A joint venture of the Chicago Mercantile Exchange and Reuters, called FxMarketSpace opened in 2007 and aspires to the role of a central market clearing mechanism.
The main trading center is London, but New York, Tokyo, Hong Kong and Singapore are all important centers as well. Banks throughout the world participate. Currency trading happens continuously throughout the day; as the Asian trading session ends, the European session begins, followed by the North American session and then back to the Asian session, excluding weekends.
There is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, large cross-border M&A deals and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time. However, the large banks have an important advantage; they can see their customers' order flow.
Currencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX is expressed (called base currency). For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.5465 dollar. Out of convention, the first currency in the pair, the base currency, was the stronger currency at the creation of the pair. The second currency, counter currency, was the weaker currency at the creation of the pair.
The factors affecting XXX will affect both XXX/YYY and XXX/ZZZ. This causes positive currency correlation between XXX/YYY and XXX/ZZZ.
On the spot market, according to the BIS study, the most heavily traded products were:
EUR/USD: 27 %
USD/JPY: 13 %
GBP/USD (also called sterling or cable): 12 %
and the US currency was involved in 86.3% of transactions, followed by the euro (37.0%), the yen (16.5%), and sterling (15.0%) (see table). Note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers.
Trading in the euro has grown considerably since the currency's creation in January 1999, and how long the foreign exchange market will remain dollar-centered is open to debate. Until recently, trading the euro versus a non-European currency ZZZ would have usually involved two trades: EUR/USD and USD/ZZZ. The exception to this is EUR/JPY, which is an established traded currency pair in the interbank spot market. As the dollar's value has eroded during 2008, interest in using the euro as reference currency for prices in commodities (such as oil), as well as a larger component of foreign reserves by banks, has increased dramatically. Transactions in the currencies of commodity-producing countries, such as AUD, NZD, CAD, have also increased

Factors affecting currency trading

Although exchange rates are affected by many factors, in the end, currency prices are a result of supply and demand forces. The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
Supply and demand for any given currency, and thus its value, are not influenced by any single element, but rather by several. These elements generally fall into three categories: economic factors, political conditions and market psychology

Foreign Currency Exposure Capture and Validation

Today's accounting systems (if properly designed) can produce accurate reports, but they are only as good as the data entered into them. Strong internal control policies, such as reconciling intercompany balances in both underlying foreign currency and reporting currency amounts, will reduce the risk of hedging the wrong amounts. The appropriate personnel must regularly review these reports to validate the data and investigate unusual or unexpected foreign currency exposures. Maintaining accurate information about your foreign currency exposures will improve, with time and practice.
To help with the data capture process and identify previous foreign currency exposures, review the current gains/losses in your foreign currency general ledger account. You may also consider natural hedging offsets and strategic techniques for managing foreign exchange exposures over the longer term, such as moving some of your production to your larger sales markets so you can match the currency of your costs and revenues.
Keep in mind: in today’s world of outsourced solutions (Chinese manufacturing, accounting departments in India, and so on), certain strategic decisions may require long-term currency hedges to protect longer term outsourcing decisions.

FOREX CURRENCY TRADING

FX, Forex or Foreign Exchange, is all about exchange of currencies from one hand to another at an ongoing price in the market. Forex is all about investing money in foreign currencies, just gain profit by selling at a higher price, the one you hold, just to buy another one at a lower price. Earlier, not many traders were clear about the Forex trading and that Forex is just short for "foreign exchange", as it did not get much publicity through media.
Foreign Exchange market is the biggest financial market in the world, with a potential of fast and great gains and a sizable number of investors. The advent of internet technology is what made Forex trading grow considerably popular as well as accessible with various types of investors.
About a decade ago, currency trading was only limited to large banks and financial firms because they were the only ones to have access to the tools and methods required to trade Forex market. However recently, due to up and coming efficient online platforms, technology has advanced to the point of being accessible to any and every individual trader who wishes to trade or invest in Forex. Marketforex.net being one of finest online trading platforms is easily accessible by all who are interested in investing in Forex.Although trading in the Forex market is done for almost all the foreign currencies, there are still, some foreign currency pairs which are considered as “Major” currency pairs as compared to the others. This is because these currency pairs are some of the most traded and most in demand currencies in the Forex trading market. These pairs dominate the percentage of trades and are as follows:
Euro/ U.S. Dollar
US Dollar/ Japanese Yen
US Dollar/ Swiss Franc
US Dollar/ British Pound.

The FOREX trading market offers its investors with exclusive and lucrative investing opportunities. Other factors like 24 hours open market, high leverage, commission-free trading and easy accessibility through various means of communications has helped Forex to become one of the most popularly invested financial markets.
With a daily volume of about $1.2 trillion money changing hands everyday, the magnitude of Forex market is definitely one of the highest as compared to the Equities and the Futures market. So, you should educate yourself comprehensively and take advantage of this giant investment vehicle.
Marketforex.net provides all the new as well as experienced traders with the opportunity to trade Forex more easily and more advantageously. We offer our clients with quicker results, better deals, higher leverage and superior customer support, thus offering them efficient and genuine Forex trading services through an advanced online trading platform.