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Friday, June 19, 2009

The Functions of the Foreign Exchange Market

There are five function of the foreign exchange market:
1-International Clearing:
Individuals , firms and governments need foreign exchange to pay for their imports of goods and services, and to collect the value of their exports (visible or invisible).
2-International Credit:
Credit is needed as goods (and services) move from a seller to a buyer, and also to allow some time for the buyer to resell the goods and be able to pay for these goods.
Arbitrage can be defined as simultaneous buying and selling of foreign currencies to have some profits from differences between exchange rates prevailing at the same time in different financial centers around the world .It is risk-less process.

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