Foreign Exchange Market: An Introduction
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loginAll the financial markets are depicted in Figure 1. We hasten to add that the foreign exchange market (from now on called forex market), strictly speaking, is not a financial market, because lending and borrowing does not take place in this market. However, since residents (ignoring exchange controls – that exist is some countries – for a moment) are able to borrow or lend offshore, or foreigners are able to lend to or borrow from local institutions, the forex market (which allows these transactions to take place) has a domestic and foreign lending or borrowing dimension, and can be viewed as being closely allied to the domestic financial market. Essentially the forex market is a conduit – as far as investment in financial markets is concerned.
