Basics of Foreign exchange markets

An exchange transaction is a transaction that allows movement between liquidity of bank deposits denominated in different currencies.The latest indicators of the Bank for International Settlements (BIS) show that on average a 24-hour day, nearly $ 1mille billion changing hands on the foreign exchange markets.

It is surprising that only 15% of changes are related to cross-border trade of goods and services. Nearly 85% are banking financial engineering or speculation.

Each sovereign state issues and manages its own currency through a central bank. The Euro zone is an exception. This new monetary region is composed of 12 Member States. The European Central Bank, which is politically independent, issues and manages the euro, the currency of this transnational association.

We must not confuse the Euro and Euro currencies, currencies that are placed in trust outside of their national banking system. For example, dollars held on behalf of a German bank is known as the Eurodollar, the yen held on behalf of a bank in London - as assets of the bank in London - are known as of Euroyen etc.

On markets, currencies names are reduced to 3 letters to meet the needs of tables on display. These names have been developed by the International Organization for Standardization and are called ISO codes or (SWIFT). We will use this convention throughout the demonstration. Currency in purple are the "legacy" of national currency units (NCU), which now cuts a single local currency, the Euro. They are negotiable as UMN until 1.01.2002, when the euro becomes the sole denomination.

The exchange rate of NCU in relation to other currencies will be displayed when the contracts are traded, but the flow of funds are mainly interbank Euro since the listing, trading and settlement of all contracts of the Monetary Union and economic (EMU), both markets bonds or shares, are now only denominated in Euro.