Where are Banks Trading in the Forex Market?

The biggest financial market in the world is the foreign exchange (forex) market, and it is much larger than stock markets. Forex trading is dependent on the exchange rate. At its most basic meaning, the exchange rate is simply the price paid for one currency in exchange for another currency.

In layman’s terms, the value of currencies can rise and fall. This fluctuation can be due to different factors that include, but are not limited to, political and economic stability, business and investor climates, or manipulation through trading.

As governments rise and fall all over the world, so do the currencies of the countries involved. For this reason, forex trading is always dynamic, never stagnant or at rest.

Those who are long term participants in forex trading know that currency rates are not that easy to predict. That’s why anyone who wishes to enter forex trading has to educate himself or herself first about the currencies of the world and see the interplay of factors that affect the worth of the currencies.

Currencies of the World

There are many kinds of currency the world over, but not all of these currencies are used as trades and payments in the forex market. The most traded currencies are the U.S. dollar, the Japanese yen, and the euro. Other currency trading instruments are the Australian dollar, the British pound, the Swiss franc, the Canadian dollar, and the Swedish krona.

Forex trading goes on at 24 hours, five days a week. Trading happen for 24 hours because of the differences in time zones. At any given point in time, there are always traders somewhere who are making demands for a specific currency. At the same time, there are other traders who meet these demands, wherever they may be in the world.

Trading Online

Players in the forex market are composed of: banks, central banks, investment managers and hedge funds, corporations, and individual investors.

Aside from phone networks, banks utilize electronic networks to engage in online trading. There is no single or centralized location for the forex market.

However, the forex market can be divided into three main regions – Australasia, Europe and North America. In each of these regions, there are major financial centers.

Every single day of forex trading begins at the Australasia region because of the way timezones are structured. The European market follows the opening of the Australasia region, and then, the North American region.

Although trading within a region does not go on for 24 hours, it is quite possible for someone from another region to perform online trading using another region. These trades happen without regard for time and space. Geographical borders are virtual, and so are timezone differences.

Interbank Market

The Interbank Market is the financial system and currency trade that goes on among banks and financial institutions. Some banks may perform currency trades on behalf of big customers, but for the most part, the trading that banks do happens from their own accounts.

Banks keep their transactions proprietary to protect the welfare of their clients which normally include multinational corporations (remember that the forex market is global) and huge mutual and hedge funds.

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Symbol Bid Ask Spread
EURUSD 1.22320 1.22340 2
GBPUSD 1.38790 1.38820 3
USDCAD 1.24370 1.24400 3
USDJPY 111.090 111.110 2
USDCHF 0.95910 0.95940 3
AUDUSD 0.79900 0.79930 3
NZDUSD 0.73040 0.73090 5
EURGBP 0.88120 0.88150 3
EURCHF 1.17340 1.17370 3
EURJPY 135.890 135.920 3
AUDJPY 88.760 88.810 5
GBPJPY 154.180 154.240 6
XAUUSD 1327.06 1327.46 40
XAGUSD 16.932 16.982 5