The sheer volume of trading completed in the FX market makes it the most liquid and most efficient market available. Because of the magnitude of the volumes traded, it is virtually impossible for individuals or companies to influence the exchange rate of the major currencies through any form of open market operations. No single individual has the resources required to manipulate pricing through targeted buying or selling on the market. The price of a currency is a direct reflection of what the market thinks about the current and future health of that economic zone.

The Forex market differs to other financial markets because it has no physical location and no central exchange. Instead it operates through a global network of banks, corporations and individuals trading one currency for another. Due to the lack of a physical exchange the Forex market operates on a 24-hour basis, spanning from one timezone to another in the world’s major financial centres.

A large part of the market is made up of currency traders, who speculate on movements in exchange rates, trying to take advantage of even small fluctuations in exchange rates. In addition to traders there are participants in the market who are simply looking to exchange foreign currency for their own currency such as multinational businesses who trade in different countries.

Exchange rate fluctuations are caused by actual monetary flows as well as anticipations on global macroeconomic conditions.The foreign exchange market is often viewed as a ‘pure’ market with very little or no ‘inside information’. Significant news affecting the market is released publicly so, in theory, everyone in the world has access to the same news at the same time. In essence, this translates into a level playing field for anyone wanting to trade Forex from home.

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Next time we’ll cover what is actually traded on the Foreign Exchange Market.

Our aim at FXProfessional is to provide the most comprehensive, but easy to understand Forex Trading Course avasilable. We want to provide our members will all the skills they need to successfully trade Forex and work from home. Our motto is ‘Keep it simple’ and to that end we will be producing a series of posts and articles titled Forex Basics which will give the uninitiated an insight into the world of Forex trading. The posts are designed to give anyone considering learning to trade Forex enough information to make a decison whether it’s for them.

We’ll be starting today with the most basic of basic questions: What is Forex?

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Later in New Zealand, the NBNZ Business Confidence is an important official release that always rocks the kiwi. It fell to 27.9 points last month, hurting the currency. To close the day, Building Consents, are released, and will show how the housing sector is doing.

For more on the New Zealand dollar, read the NZD/USD forecast.

Islamic banks tend to levy a payment when a promise or “waad” is made to enter into a forward foreign currency hedging contract to reflect the parties’ commitment to the transaction. Bank Negara’s sharia advisory council, whose rulings are binding on Islamic banks in Malaysia, said such charges would render the promise a bilateral waad, which is not allowed by the sharia.

A bilateral waad is deemed a contract and some experts said in this context it could lead to an agreement without the present delivery of the price and subject matter of the transaction, giving rise to uncertainty which is prohibited by Islamic law.

The yen’s gains further stoked speculation that Japanese authorities will take action to combat yen appreciation, which hurts the country’s export-driven economy. The euro also fell to its lowest level against the dollar in roughly five weeks, and currencies tied to commodities, such as the Australian, New Zealand and Canadian dollars were all down sharply.

Earlier in the day, U.S. official data said the number of individuals filing for initial jobless benefits last week rose to a seasonally adjusted 500K, after rising to a revised 488K in the preceding week. Analysts had expected claims to decline to 475K last week.

Japan’s deputy finance minister Naoki Minezaki said the yen’s rise is having a severe effect on the country’s exporters. Local media reported that the Bank of Japan is looking at expanding a bank lending program to lower interest rates and help weaken the yen.

An agreed-upon value for a transaction in a country’s medium of exchange, such as the dollar or peso. A standard of value allows all merchants and economic entities to set uniform prices for goods and services. This standard is necessary in order to maintain a stable economy.

Historically, gold has been used as a standard of value in many countries. The U.S. went off the gold standard domestically in 1934 and internationally in 1971. A floating rate of currency exchange is now used instead.