1. Realize the international transfer of purchasing power International trade and international financing involve at least two kinds. Different currencies form the purchasing power of different countries.
This exchange takes place in the market.
The foreign exchange market provides an economic mechanism for this transfer of purchasing power.
It exists to connect the aspirations of various potential forex sellers and forex buyers.
When changes in the foreign exchange market make the supply of foreign exchange exactly equal to the demand for foreign exchange, all potential selling and buying desires are satisfied and the foreign exchange market is in equilibrium.
In this way, foreign exchange markets provide an international transfer mechanism for purchasing power.
At the same time, the transfer of purchasing power becomes fast and convenient because of the developed communication tools that connect the foreign exchange markets around the world as a whole. Currency exchange and capital remittance can be completed in a short time.
2. Providing Financial facilities to facilitate the financing of international traders through the foreign exchange market.
Foreign exchange deposit and loan business concentrates the idle funds of each country, can adjust the surplus and shortage of funds, and speed up the turnover of funds.
The foreign exchange market provides a guarantee for the smooth progress of international trade.
When the importer does not have enough cash to pick up the goods, the exporter may issue a draft to the importer to allow deferred payment and sell the draft in the form of a bill to recover the payment.
The convenient financing function of foreign exchange market also promotes the smooth progress of international lending and investment activities.
Most Treasury bills and government bonds issued in the United States are purchased and held by foreign authorities and corporations.
3. Provision and speculation In international economic transactions denominated in foreign exchange, both sides face.
Due to the different judgments and preferences of market participants on foreign exchange risks, some participants prefer to spend a certain cost to transfer risks, while others are willing to bear risks to achieve expected profits.
This has led to two different types of behaviour: currency preservation and currency speculation.
Under the gold standard and regime, the exchange rate was basically stable and there was no necessity or possibility for speculation.
Under the floating exchange rate system, the function of foreign exchange market has been further developed.
The existence of foreign exchange market not only provides a place for hedgers to avoid foreign exchange risk, but also provides opportunities for speculators to take risks and gain profits.
The Fed may step on the accelerator as global central bank resolutions come thick and fast.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
