Hedgers or Hedge Funds are one of the primary participants in the currency exchange market. They are primarily businesses or other organizations that participate in international trade. Only a limited number of investors are able to participate in hedge funds. The strategy employed participants in forex market ppt file this participant in forex trade is designed to minimize the exposure to certain unwanted business risk.
This group of participants has grown from 2001-2004. That growth has included the number of hedgers and the overall size of the participants. Banks are another group of entities that participate in the forex market. The inter-bank market is made up of the largest investment banking firms in a particular country. The spreads or the difference between bid and ask prices are usually sharp in this sector. Majority turnover and a truly large amount of speculative trading are due to banks and the inter-bank market. Commercial companies are another important group of participants in this market.
They usually trade small amounts compared to the trade volume of banks or speculators. Their trading activities usually have little short-term effects on the currency market rates. But in the long-term, their trade flows are important in a currency’s exchange rate. A country’s central bank plays a very critical role as a participant in the market. A central bank controls money supply, interest rates, and inflation.
This participant has a huge foreign exchange reserve that can be used to stabilize the market. Some governments give control to their central banks regarding the monitoring of target rates for their country’s currency. At times central banks would intervene in the forex market. Central banks may not always achieve their target rates. Often enough when the resources of a certain market would be combined it may easily overwhelm any central bank’s efforts. Scenarios like this have been observed in Southeast Asia in more recent times.