Forex daily volume was nearly six billion U.S. dollars for the USD currency, an amount three times higher than for the euro (EUR). The forex – or foreign exchange market – turnover per day is a figure that is not often measured, only once every three years. No figures are available for 2020, for instance. What figures are available, however, indicate that the USD currency far outweighs that of many other currencies all over the world.
What is the forex market?
The forex market is based on the fluctuations in the value of currency interest rates. For example, the U.S. dollar performs differently against other major currencies. If one can properly predict these fluctuations, they can buy a weaker currency with a stronger one. After the currencies rebalance, the original currency will be worth more terms of the exchange rate, giving the investor a profit. There are many foreign exchange trading services, including many multinational banks which already work in multiple currencies.
Other currency trading functions
Countries and central banks often hold foreign currencies. These international reserves help facilitate the transactions in international trade, which is one reason China’s foreign reserves are so high. Countries can buy and sell foreign currencies to maintain a particular exchange rate. This is necessary for currencies which are pegged to another currency, such as the U.S. dollar. However, some countries are accused of exchange rate manipulation in order to make their exports seem more attractive. Finally, certain currencies are considered safer. Citizens and firms in a country with an unstable currency will buy these currencies to avoid volatility, or even hyperinflation, in their home currency.
