Summary of Navigating the Waters of Foreign Exchange and International Payments

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You wouldn’t know it by reading the financial news, but the foreign exchange market is a huge and growing enterprise that undeniably dwarfs global stock and bond markets. In an interconnected world, more and more companies must hedge the currency risks their cross-border transactions create. Yet despite its size, the foreign exchange market can seem impenetrable and confusing. The Economist Intelligence Unit offers an easy-to-digest primer on foreign exchange, which getAbstract recommends to students, investors and business professionals.

In this summary, you will learn

  • Why the foreign exchange market has grown and
  • What types of transactions firms can engage in to hedge their currency risks.
 

About the Author

The Economist Intelligence Unit is an independent research and analysis organization.

 

Summary

Stock markets often grab the headlines, but for real action, look no further than the foreign exchange (forex or FX) market, which sees 28 times more daily trading volume than all the world’s equity markets combined. In April 2013, currency transactions reached $5.3 trillion per day. Financial institutions aiming to cash in on FX movements and multinationals trying to manage the forex risk of their cross-border deals are typical market players. FX is complex and opaque, but firms that manage their risk wisely can bolster liquidity, cash flow and profits.

Despite the risk...


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