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The Function of the Forex Market

The function of the Forex market relies on:
  1. To balance the prescription of the Forex fund.

  2. Provides method to avoid risk from the Forex market. Some companies or banks, because have the forward revenue and the expenditure activity from the Forex market, to avoid lost from the forward fluctuation, it is possible to do forward trading from the Forex market, to avoid the exchange risk.

  3. To provide convenience for the Central Bank to stabilize exchange rate. Because Forex market can be intervened by the large inflow of short-term fund from worldwide which will cause the Forex market to be bullish or bearish, so the Central Bank must intervene in the Forex market, the Central Bank could stabilize the currency through the Forex market by buying and selling the currency in a very large amount.