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Foreign Exchange Market – Landscape

The FX Landscape is changing. What used to be a market dominated by interbank traders, the forex market is witnessing new market participants over the recent years.

While studying the different market participants we need to understand the trading objectives of the participants. A common objective of all market participants is to maximise their FX returns. Importers, exporters, retail investors, financial investors and market makers all have the task of forecasting rates in order to maximise their returns. However the extent to which information is available to achieve this objective differs across participants. Interbank dealers, large financial institutions have much more access to critical financial information than retail and corporate investors and they play a much larger role in influencing FX rates. Research also shows that these dealers are much better at forecasting FX rates and money management and therefore more profitable than retail and corporate traders in general.