Foreign exchange market - What is it? This article will discuss and give you an introduction into the biggest financial market in the world. I will give you my own definition and equip you with tools such as contemporary news and articles about the market.
Foreign Exchange Market Definition
The foreign exchange market can best be defined as: An OTC financial market for trading currencies. Countries, companies, institutions and individual traders use this market to exchange one currency to another. The buying and selling of a certain currency (together with a myriad of other financial factors) in the market determines its relative value.
The above gives a general definition to the foreign currency exchange market. But what is its purpose? And what functions does it serve?
What is Foreign Exchange Market?
Ok, so we understand that this market is the place to exchange one currency to another. But why do we need it? Isn't that why we have money exchange vendors at the corner of every street? Well, the answer is NO.
This financial market was created with one purpose in mind: To allow businesses and even Governments a platform which will assist in international investments and trade.
In addition the exchange market is unique because it offers 24 hour trading. This means that, not like other financial markets which are closed during the nighttime, foreign exchange traders can trade at any hour of the day, even during the night. The only times which trading is closed is during weekends.
Foreign Exchange Markets - how many are there?
There is only one foreign exchange market in the world. It is a decentralized over-the-counter type of market. This means that financial centers from around the world serve as anchors for many traders who are also global buyers and sellers.
Financial centers are specifically large banks. However, if a regulated entity accumulates enough money it can also become a sort of financial center and act as an additional anchor for worldwide currency exchange trades.
Now, I believe that all of the above is really useful because - if you are looking to save when traveling, or even become a trader one day, then you can't understand foreign exchange without learning all of the above.
So how does the above effect us? Needless to say, that the value of a currency goes up and down constantly on the market. This value ultimately affects the exchange rate that we all pay when going abroad or when buying something from a foreign country online.
How do we get the edge on when is the best time to exchange our money? We follow foreign exchange market news. For someone who is not a trader and who does not see financial charts and systems before him all day long, the best way to determine if the time is right to buy a foreign currency would be to tap into the finance news centers in your local country and see what's the latest word about the currency you are interested to buy.
For residents of the U.S you can check out this market news page (from the Chicago Tribune)
My personal recommendation is this: always check up the latest financial news about the currency you are looking to exchange your money into. For example, if you were looking to invest, travel or buy something from Egypt this last few weeks you would have received tons of related information about foreign exchange rates of the US Dollar buying capability on the Egyptian pound.
So yes, international political news also affects the value of a currency. Revolutions, economic breakthroughs and discoveries are all reported on in financial newspapers and articles online and this is something you should definitely follow if you are interested in converting currencies.
To sum it up, all of the above is basic but priceless knowledge you should carry when your goal is to invest or buy something from a foreign country. This is why learning about the foreign exchange market is so important.
Tuesday, February 15, 2011
Thursday, January 20, 2011
Foreign Exchange Rates - USD Spotlight
Foreign exchange rates differ from country to country. That is why today I will be focusing on the United States Dollar and the resources I've discovered in order to be sure you're not missing out on a good exchange rate. I've discovered resources which let you know what's the buying rate of the bank and at how much you can buy from them.
Research is key to good foreign exchange rates when you exchange money!
Ok, so let's start with this great example of the weekly US Dollar index as given by the Federal Reserve bank of America. This is a great resource to learn from as I believe it states the formal position of the US on its exchange rates towards its banks and other countries.
Only problem is - This index only gives you the past week's USD foreign exchange rates stats. So if you are looking to exchange currencies today it is kind of useless. However, it does give you the basic reference line to see how much local banks are charging over this price and on which price they are basing their commission.
How to find the best foreign exchange rates for the USD?
The answer to that question is a bit old fashioned - Call your local banks and compare. I know, a little over the counter type of an answer, but it's true. It is almost a certainty that if you need to exchange the US Dollar into cash of another currency then local banks are probably your best choice.
The only thing left to do now is to compare between the leading banks in your area. Call as many as 5 local leading bank branches in your city and write down their exchange rate and commission rate. You'd be surprised at the changes but keep in mind that exchange rates aren't supposed to change dramatically while commission rates can prove to vary significantly.
If you are changing a lot of Dollars into another currency then check the local currency exchange vendors as well.
- But the least obvious answer is also usually the best one - Withdraw cash by using your ATM or Debit card when you get to where you are traveling. This is probably the best foreign exchange rates offer you will get (with the lowest commissions and best exchange rate).
- Do not use your credit card to withdraw cash at a foreign ATM. Then charges are huge!
Is the online foreign exchange rates converter good for the USD?
If you are thinking about using a foreign exchange rates converter on the USD to determine its rate you should know this: currency converters are only a program that calculates exchange rates according to a multitude of parameters. While some of these currency converters are reliable and good (like this one from Bloomberg, or this one from Yahoo Finance), they only show the current rate and are in no way any kind of proposal to purchase or sell.
In fact, most banks change their exchange rate many times during the day, just like the calculators, so any information received from them is not 100% accurate.
In conclusion, the best US Dollar foreign exchange rates are found domestically in the United States or at "domestic" US bank branches' ATM's at the country you are visiting (for cash withdrawals only with debit or ATM cards - not credit cards!).
Tuesday, January 4, 2011
Foreign Exchange - Crazy World
Foreign exchange is crazy these days. I do a lot of traveling and I know. To convert currencies from one country to another is just a pain. So, I decided to do something about it! I'm Terry Saggat and this is my blog about saving money on all foreign exchange transactions all across the globe.
It's not easy, you want to go on that perfect vacation and all you think about are the beautiful sites and leisure time that's so overdue, but wait, a trip to the bank, or the money exchange booth across the street and the spending bonanza starts.
I thought changing money was no big deal, but foreign exchange prices just seem to come and snip you on the butt wherever you go. It's not just when I wanted to change Dollars into Euros, no the bank spreads were huge! But then I found that changing money into cash was the least of my worries. After all how much cash will I be using on my trip anyways?
No, receiving my travel expenses bill at the end of the month was nothing short of a nightmare. Charges upon charges, upon commission charges all having to do with exchanging foreign currencies.
I am calling all bloggers, travelers and foreign merchants out there to join my fight in finding a one stop shop solution for foreign exchange overcharging.
Is there anything like it out there?
Lets start with a simple question - where is the best place to change domestic currency to foreign currency in the US?
It's not easy, you want to go on that perfect vacation and all you think about are the beautiful sites and leisure time that's so overdue, but wait, a trip to the bank, or the money exchange booth across the street and the spending bonanza starts.
I thought changing money was no big deal, but foreign exchange prices just seem to come and snip you on the butt wherever you go. It's not just when I wanted to change Dollars into Euros, no the bank spreads were huge! But then I found that changing money into cash was the least of my worries. After all how much cash will I be using on my trip anyways?
No, receiving my travel expenses bill at the end of the month was nothing short of a nightmare. Charges upon charges, upon commission charges all having to do with exchanging foreign currencies.
I am calling all bloggers, travelers and foreign merchants out there to join my fight in finding a one stop shop solution for foreign exchange overcharging.
Is there anything like it out there?
Lets start with a simple question - where is the best place to change domestic currency to foreign currency in the US?
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