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gold standard and forex market

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Consider the following: You have been asked by a local college to write a lecture that explains the gold standard and addresses the functions of the world's major exchange markets.

Write a 1050 word summary detailing the functions of the worlds major foreign currency exchange markets. Be sure to discuss the positive and negative aspects of using a gold standard. Use at least 3 sources.

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You have been asked by a local college to write a lecture that explains the gold standard and addresses the functions of the world's major exchange markets.

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Function of forex markets:

Today's foreign exchange or forex markets performs an international clearing function by bringing two parties wishing to trade currencies at agreeable exchange rates. The forex market transfer purchasing power between two nations. Another major function is to provide credit to the importer debtor. The forex market also performs the hedging function to cover the risks involved in foreign exchange transactions. The forex market provides a host of hedging tools such as futures, options and forward contracts to minimize the risks associated with constantly fluctuating foreign exchange rates between currencies of two nations.

The major role of foreign exchange market is to determine the price of the different currencies in terms of one another and to transfer currency risk from more risk-averse participants to those more willing to bear it. As in any market essentially the demand and supply for a particular currency at any specific point in time determines its price (exchange rate) at that point. However, since the value of a country's currency has significant bearing on its economy, foreign exchange markets frequently witness government intervention in one form or another, to maintain the value of a currency at or near its "desired" level.

International business relies directly on the functionality of the FOREX. In addition to international business, citizens traveling to foreign nations have to a standard in which they can pay for foreign goods and services. FOREX make these situations possible. ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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