Foreign Exchange Markets

This lecture will provide a summary of the world’s major foreign currency exchange markets. It will inform you on what money markets are, where the major exchange markets are as well as why they exist. It will also provide information on the gold standard. The lecture will explain what the gold standard is and present positive and negative aspects of using the gold standard.

Money markets are places where moneys can be bought sold or borrowed. The foreign exchange market is when one currency is traded for another currency. It is the largest market in the world trading for cash value, trading between large banks, central banks, currency speculators, multinational corporations and governments. The foreign exchange market is said to be unique due to its trading value, the liquidity of the market, the large number and variety of traders in the market, how they are wide spread geographically, and because of its long trading hours (Answers.com).

The major markets within the foreign exchange are London, New York, Tokyo, and Singapore. London is the largest, second is New York and Tokyo & Singapore are next with Hong Kong right along with the other Asian countries (Ball, D., McCulloch, W. Jr., Frantz, P. Geringer, & Minor, M., 2006). London became the largest market for several reasons. First, it is a great location. The second reason is its operating during the Asian and American markets. The last reason is the creation of the euro market.

The Euro was created in the 1950’s when Russia’s oil revenue, in U.S. dollars was, was deposited outside of the United States in fear of it being frozen by U.S. authorities. This made for a large amount of U.S. to be outside of their control (Answers.com). The euro is accepted in European countries that still use their original currency. Britain and Switzerland are two European countries that use the euro in conjunction with their own currency. The islands of Guadeloupe, Martinique, St.

Barts and St. Martin use the euro now as their official currency.

London has a very important role in currency trading. London shares trading hours with markets in Asia and the Middle East during its morning session and with the New York market during its afternoon session, London has more opportunities to make more transactions than both the New York and Tokyo markets (Ball, D., McCulloch, W. Jr., Frantz, P. Geringer, & Minor, M., 2006).

The liquid currencies are the Singapore dollars. Singapore is the fourth largest trading center in the world and also the largest center of non-yen trade in Asia. The Unites States dollar is the most traded currency, but the U.S. dollar euro market is the busiest. Next in line is the United States sterling, then the Unites States Swiss franc, and last is the euro-yen. The United States dollar is dominating the other markets as the most traded currency and it continues to increase. This is mainly due to the Asian markets continued growth. The majority of the trading done in Asia is traded in the United States dollar (Ball, D., McCulloch, W. Jr., Frantz, P. Geringer, & Minor, M., 2006).

Although London, New York and Tokyo have the largest currency markets, those are not the only markets. The other markets include Los Angeles and San Francisco, Hong Kong, Singapore, Bahrain, Frankfurt, Zurich, and Paris. The majority of these markets allow for 24 hour trading (Ball, D., McCulloch, W. Jr., Frantz, P. Geringer, & Minor, M., 2006).

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