Currency Exchange Markets

          Currency exchange markets are electronic markets in which banks and institutional traders buy and sell various currencies on behalf of businesses and other clients. In the global economy, consumers may want to purchase goods produced, or services provided, in other countries. Likewise, an investor residing in one country may wish to hold securities issued in another country. For example, a U.S. consumer may wish to purchase a product in a foreign country. If the product is priced in the foreign currency in order to complete the transaction. Businesses that sell their products in foreign countries usually receive payment in the foreign currencies. However, because the relative values of currencies may change, firms often use the currency exchange markets to reduce the risk of holding too much of certain currencies.