Foreign exchange market is a platform where goods and services are exchanged between sellers and buyers on international scales. It is known as the biggest facilitator of international trade which gives the ideas related to the future of businesses for people who seek to enter into the world of international trade. In simplest terms, a foreign exchange market is the exchange of local currency for foreign or vice versa.
Exchange rates are the most important elements of the Forex market. Exchange rates of a given currency define how much a country is able to import or export and how it can affect the economy which is determined by the supply and demand forces.
Secondly, by exchanging foreign currencies, countries can service foreign payments especially debts. These exchanges are done through the forex market which makes it possible for governments and institutions to get involved in import and export activities.
Forex market is important for countries to raise their foreign reserves. Without such exchange of foreign currency, it will be difficult for economies to stay competitive in the field of global trading as well as for developing nations it is important to have sufficient foreign reserves as these countries have to compete in global markets in order to avoid trade deficits and debt.