Foreign exchange market

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The currency market or foreign exchange market is the market where one currency is traded for another. It is one of the largest markets in the world. By some estimates, about $2 trillion worth of currency changes hands every day.

Some of the participants in this market are simply seeking to exchange a foreign currency for their own (like tourists or multinational corporations which must pay wages and other expenses in different nations than they sell products in). However, a large part of this market is made up of currency traders, who bet on movements in the value of currency much like one would in a stock market. Currency traders can obtain substantial gains by taking advantage of even small fluctuations in currency price. These traders also profit from arbitrage. Foreign currency exchange is unique in the financial world in that exchange rates (the price of one a currency in terms of another) are highly sensitive to many factors, many different investors have access to the market, the market is very liquid, and currency is traded around the clock.

Learn more about market dynamics and currencies by reading about the exchange rate.

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