The
foreign exchange market (forex, FX, or currency market)
is a worldwide decentralized over-the-counter financial market
for the trading of currencies. Financial centers around the
world function as anchors of trading between a wide range
of different types of buyers and sellers around the clock,
with the exception of weekends. The foreign exchange market
determines the relative values of different currencies.
The
primary purpose of the foreign exchange is to assist international
trade and investment, by allowing businesses to convert
one currency to another currency. For example, it permits
a US business to import British goods and pay Pound Sterling,
even though the business's income is in US dollars. It also
supports speculation, and facilitates the carry trade, in
which investors borrow low-yielding currencies and lend
(invest in) high-yielding currencies, and which (it has
been claimed) may lead to loss of competitiveness in some
countries.
