Other Forex Market Players.

2. Large Commercial Companies

Let’s learn more about the other forex market players.

Companies take part in the foreign exchange market for the purpose of doing business.

For instance, Apple must first exchange its U.S. dollars for the Japanese yen when purchasing electronic parts from Japan for its products.

The volume they trade is much smaller than those in the interbank market.  Thus this type of market player typically deals with commercial banks for their transactions.

Mergers and acquisitions (M&A) between large companies can also create currency exchange rate fluctuations.

In international cross-border M&As, a lot of currency conversations happen that could move prices around.

3. Governments and Central Banks

Governments and central banks, such as the European Central Bank, the Bank of England, and the Federal Reserve, are regularly involved in the forex market too.

Just like companies, national governments participate in the forex market for their operations, international trade payments, and handling their foreign exchange reserves.

Meanwhile, central banks affect the forex market when they adjust interest rates to control inflation.

By doing this, they can affect currency valuation.

There are also instances when central banks intervene.  They can intervene either directly or verbally when they want to realign exchange rates.

Sometimes, central banks think that their currency is priced too high or too low.

When this happens they start massive sell/buy operations to alter exchange rates.

4. The Speculators

Currency speculation is the act of buying and holding foreign currency in the hopes of selling that currency at a higher exchange rate in the future.

This is in contrast to those who buy currencies to finance a foreign investment or to pay for imported products or services.

“In it to win it!”

This is probably the mantra of the speculators.

Speculation in the forex market involves the buying and selling of currencies with the view of making a profit.

Speculators are focused on price fluctuations.

It is called speculation because of the uncertainty involved since no one can know for sure whether a currency pair’s price will go up or down.

Traders assess the likelihood of either scenario before placing a trade.

Comprising close to 90% of all trading volume, speculators, as forex market players come in all shapes and sizes.

Some have fat pockets, some roll thin, but all of them engage in the forex simply to make bucket loads of cash.

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