What is the foreign exchange market?
The foreign exchange market is the market for buying and selling different currencies. It is primarily an over-the-counter market with trades between large commercial banks accounting for most foreign currency transactions. Other participants in the foreign exchange market include:
- brokers, who match buyers and sellers in the market
- customers of banks or brokers, mainly large businesses who engage in international trade and/or investment, and
- central banks
The Federal Reserve Bank of New York website has a document on foreign trade and foreign exchange including a chapter, Foreign Currency Exchange, that discusses the basics of the foreign exchange market. For more detail on the foreign exchange market, the website also has a document titled All About...The Foreign Exchange Market in the United States.
For a more technical treatment of developments in the foreign exchange market, please see the Treasury's annual Report to Congress on International Economic and Exchange Rate Policies and the Federal Reserve Bank of New York website.