A small introduction to the Forex market and the exchange rates
posted on 29-06-2017 by Gurusoccer
Some of you probably come across the term “FOREX” for the very first time, or other may have heard it, without knowing what it has to deal with. The following article is for you if you belong to the two previous categories. On the contrary, if you are a FOREX professional you will definitely get bored reading it, so it is recommended to skip it
The term “FOREX” is not something new in world economy. Actually, it is an abbreviation, that derives from the words “Foreign” & “Exchange”. A short definition of “FOREX” is included in the following phrase: FOREX is a worldwide market dedicated exclusively in currency trading. If you ‘d like to elaborate, try to read more about “Bretton Woods system of monetary management”, a system that was disestablished in 1971. That change gave rise to the formation of a new market, dealing with the currency exchange rates, the FOREX market.
Exchange rates and the mechanism that controls their variations is not something that has to do only with economists or professional analysts. Every product that is sold has a price, dependedable in a considerably degree from the currency exchange rates, let alone if it is an imported product or based on imported materials. The exchange rate of the domestic currency vs the product’s (or materials’) origin currency, determines to a great extend the final price that the product arrives to the final consumer.
In addition, exchange rates and their variations have the same importance in the business world. For instance, an import company that trades with a factory in a different currency than the one that they sell to their customers, is obliged to take care of the exchange rates. An unexpected devaluation of the country's currency, or a revaluation of product’s origin currency can afflict significantly company’s profit, and in some cases this currency risk can affect even their livability.