What Does a Currency Trader Do?
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The interbank market is the top-level foreign exchange market where banks exchange different currencies. The Electronic Broking Services EBS and Thomson Reuters Dealing are the two competitors in the electronic brokering platform business and together connect over banks. These currencies do not have fixed values but, rather, values that fluctuate relative to other currencies.
The interbank market is an important segment of the foreign exchange market. It is a wholesale market through which most currency transactions are channeled. It is mainly used for trading among bankers. The three main constituents of the interbank market are:. The interbank market is unregulated and decentralized.
There is no specific location or exchange where these currency transactions take place. However, foreign currency options are regulated in a number of countries and trade on a number of different derivatives exchanges.
Central bank in many countries publish closing spot prices on a daily basis. Unlike the stock market, the foreign currency exchange market Forex does not have a physical central exchange like the NYSE.
Major banks handle very large forex transactions often in billions of units. Other factors contribute to currency exchange rates and these include forex transactions made by smaller banks, hedge fundscompanies, forex brokers and traders.
Companies are involved in forex transaction due to their need to pay for products and services supplied from other countries which use a different currency. Forex traders on the other hand use forex transaction, of a much smaller volume with comparison to banks, to benefit from anticipated currency movements by buying cheap and selling at a higher price or vice versa.
This is done through forex brokers who act as a mediator between a pool of traders and also between themselves and banks. Central banks also play fx trader currency converter role in setting currency exchange rates by altering interest rates. By increasing interest rates they stimulate traders to buy their currency as it provides a high return on investment and this drives the value of the fx trader currency converter central bank's currency higher with comparison fx trader currency converter other currencies.
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