World currency market: working principles

Currencies are exchanged through acquisition and sale in the foreign exchange market. In itself, the foreign exchange market is a system that provides the necessary socio-economic and organizational moments necessary for trading currencies. The world currency market is first and foremost a competitive market, which means that a large number of participants constantly attend it. Unlike currency exchanges, where traders make money at the expense of the difference in rates, the market deals with economic relations between importers and exporters of goods. They are also known as primary market subjects, and the formation of the basic supply and demand is exactly in their charge.

As for the above traders, they consider the currency as a commodity, and carry out currency trading in order to make a profit. It should be noted that this kind of activity is the most characteristic of the modern currency market. Now 9 out of 10 deals are just buying and selling with the purpose of earning money on the difference in rates, while at the same time there is a relatively small market volume for trading operations.

By classification, the world currency market can be called multi-level. This means that it consists of national, regional and international markets. At the national level, the means of carrying out operations are banking systems. The regional currency market is the place where the purchase and sale of hard currency, as well as local currencies, is conducted. The three main such markets are continental, and represent Europe, Asia and America. Each of them has several financial centers. The volume of transactions is hundreds of billions of dollars a day. Above regional - the international market, which, in fact, is their totality. Money constantly moves between markets, which is explained by the change in quotations - as a result, at the international level there is always a balance.

One of the basic concepts that the world currency market operates on is convertibility. The currency can be freely convertible, partially convertible, or non-convertible. The better this indicator, the more popular is the currency in the markets of different levels. To date, the hard currency is not so much - it's the US dollar, the euro, the Swiss franc, the pound sterling, the Japanese yen and some other currencies. In particular, the Chinese yuan may soon be on the leading positions , but so far this is not due to the specific monetary policy of China - its currency is artificially restrained from strengthening.

SCR is not only freely traded in markets of all levels, but also acts as a reserve in most states, along with precious metals. If the currency is partially converted, it rarely goes beyond the regional market. An example of such a currency is the Russian ruble. Due to various reasons, non-convertible currencies can only be used within a certain country. One of the most vivid examples to date is the North Korean won. Closeness of the country's economy leads to the fact that the world currency market does not consider wons as a means of payment.