Foreign Exchage Market

Almost every nation has its own national
currency or monetary unit—its dollar, its peso,
its rupee—used for making and receiving
payments within its own borders. But foreign
currencies are usually needed for payments
across national borders. Thus, in any nation
whose residents conduct business abroad or
engage in financial transactions with persons in
other countries, there must be a mechanism for
providing access to foreign currencies, so that
payments can be made in a form acceptable to
foreigners. In other words, there is need for
“foreign exchange” transactions—exchanges of
one currency for another.