Word of the Day: FOREX

Watch more Capital Account @ www.youtube.com twitter.com twitter.com Today's word of the day is FOREX. This is the market in which currencies are traded. The FOREX market is the largest, most liquid market in the world. It is open 24 hours a day, except weekends, with an average daily turnover of more than 4 trillion dollars. Traders include large banks, central banks, institutional investors, currency speculators, corporations, etc. The modern foreign exchange market began forming after the breakdown of the bretton woods, fixed exchange rate system, something that we have covered before on this show. Remember, under the bretton woods system each country tied its currency to the US dollar, which was then backed by gold. The US promised to fix the price of gold at 35 dollars per ounce. But with the automatic stabilization mechanism provided through bretton woods no longer around, starting in the early 70s, national currencies were free to float, resulting in a huge build up of exchange reserves over time. Look at that, that's a huge buildup in foreign exchange reservers, which is a direct result of different nation's central banks printing massive amounts of their own currencies after 1971. The three most liquid currency markets in the world remain the euro, the yen, and the us dollar. But with the central banks responsible for maintaining the value of these fiat currencies facing their own unique set of problems, we may very well see a change in this mix in the not too <b>…</b>
Source: Word of the Day: FOREX (Youtube).