Foreign Exchange

Foreign exchange, also known as FX, involves the exchange of currency pairs with the aim of managing or benefiting from fluctuations in their exchange rates

What is foreign exchange?

Unlike assets such as stocks and commodities, which are handled on regulated central exchanges, currency movement occurs over the counter (OTC). This means exchanges are primarily conducted between institutional counterparties in major financial hubs worldwide, known as the interbank market.

The largest and most liquid hubs include London and New York, with Tokyo, Hong Kong, Frankfurt, and Singapore also serving as significant centers. If you're new to the world of FX and want to learn more, continue reading to discover how this dynamic market functions.

The world's most active market

The FX market is the world’s most active by volume, facilitating nearly $7 trillion in transactions daily, making it the largest market by value.

Due to its global reach, the market operates continuously 24 hours a day, excluding weekends. This constant activity plays a crucial role in determining the exchange rates for currencies worldwide.

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Major Pairs

These are the most actively traded pairs and offer high liquidity and lower volatility. All major pairs include the US dollar. They collectively represent 88% of forex trading volume. Examples: GBP/USD, EUR/USD, USD/JPY, USD/CHF, USD/CAD, NZD/USD, and AUD/USD.

Minor Pairs

Exotic Pairs

Exotic pairs involve a major currency paired with a currency from an emerging market country. They are characterized by low liquidity and high volatility, leading to rapid and unpredictable price movements. Examples: EUR/TRY, USD/HKD, NZD/SGD, GBP/ZAR, NOK/RUB, and AUD/MXN.

Currency markets are subject to volatility, macroeconomic changes, and unforeseen global developments.

Recognizing how risk, liquidity, and exposure interact is fundamental to responsible
and informed market participation.