The foreign exchange market

The importance of the foreign exchange market is very big divide that globalization is covering more territory every day hospitalization trade has become a great need within each nation, and therefore the rate of a currency of a country's currency another is a dilemma in question the value of each coin and must seek the fairest solution for each nation not to mention the safety of foreign exchange risk that this creates. A foreign exchange market is a market where you can convert the currency of one country's currency ortho: The exchange rate is the speed at which it becomes a currency to another. Currency risk: the risk that gains from changes in exchange rates. However the exchange irrigation can be divided into three categories: Transaction exposure: the extent to which the proceeds of the transaction will be affected by fluctuations in currency exchange rates Exhibition review the financial statements of the company affected by the impact of the change in exchange rates. Economic Exposure: companies that generate profits in the future. These factors help to have a more active trade for each nation not to mention the advantages and disadvantages that this obviously causes, consumers can compare prices of goods and services in different countries using the exchange rate, the knowledge of this type of change is critical to our organization and we could get a chance for companies from other nations. The main uses of foreign exchange dealing international business are: To change money received in the course of business abroad back to the currency of your country of origin To pay a foreign company for its products or services in the currency of your country To invest excess cash for short in foreign markets To benefit from short-term movements of funds from one currency to another in the hope of profiting from changes in exchange rates, also called currency speculation

However currency convertibility can be restricted by the influence of governments such as: - The currency of a country is said to be freely convertible when the country's government allows residents and nonresidents to purchase unlimited amounts of foreign currency, thus - A currency is said to be externally convertible when only nonresidents may convert a foreign currency, without limitation - A currency is nonconvertible when neither residents nor nonresidents are allowed to make a foreign currency Some governments are limited or restricted due to the currency freely convertible fear it would lead to a run on its currency reserves or capital flight. Just as there are different uses of currency there are also different types of change in which the administrator must have the ability and skills to determine if the exchange rate is more favorable to the company because if you get a bad decision could put at risk the same goals. The exchange rates to choose from include: Spot spot exchange rate Forward exchange forward exchange Currency Exchange Whatever you choose all the sales manager and disadvantages, are driving these payment types and times where the payment may decrease or increase all depends on the foreign exchange market and the exchange rate to the point, but considering also exchange may increase the risk, the higher the amount the more irrigation negotiated exchange. Exchange rates are determined according to the supply and demand for each currency in relation to the supply and demand of another nation, interest rates and exchange rates, effects and psychological investment Bandwagon The price and exchange rates are determined by:

 The law of one price: this determines the price should be the same in competitive markets free of transportation costs and trade barriers and the price is expressed in terms of the same coin Purchasing power parity (PPP): This helps us determine the real exchange rate by comparing prices of the same products in different currencies. Money supply and price inflation: this helps us to identify changes in relative prices that change within a nation thereby changing exchange rates, inflation occurs when the money supply increases faster than production. But if what is the forex market? What is the address?, The forex market is a global network of banks, brokers and exchange offices that are connected by electronic communication systems, this makes the Forex market have more security in the movement of transactions as they handle very large amounts of cash as the market never sleeps and the market is highly integrated The major shopping centers are: London New York Tokyo Singapore The interest rate reflects expectations about future exchange rates, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries, but there are individuals who believe that in inefficient markets believe that prices reflect all available information, then we would put the forward exchange rates would not be the best predictor of future spot exchange rates d. The use of predicting interest rates and exchange rates helps the administrator to get a better decision making, some types of change are predicted by econometric models, which are based on economic theory. But there are tactics designed primarily for the protection of various cash flows to exchange rates and to generate strategies according to good decision making Companies can use a strategy of lead as An attempt to collect accounts receivable in foreign currency when foreign currency is expected to depreciate

 Paying debts in foreign currency before maturity when a currency is expected to appreciate Companies should develop a mechanism to ensure that it can maintain an appropriate mix of tactics and strategies to minimize your risk and leverage currency exchange rates for the company and increased sales and profits for the organization