Foreign exchange transactions are exchanges between currencies of different countries or regions, that is, buying one currency in a pair of currency combinations and selling another currency at the same time. Transactions are mainly conducted through electronic networks between banks, enterprises and individuals. Foreign exchange is traded in the form of currency pairs, such as EUR/USD.
The foreign exchange market is the world’s largest financial market with the highest transaction volume. The average daily trading volume of the global foreign exchange market has been showing a rapid upward trend. According to statistics from the Bank for International Settlements, the annual average daily trading volume of the foreign exchange market in 2019 reached 6.6 trillion US dollars, an increase of 29.4 from the 5.1 trillion US dollars in 2016 %.
- Value preservation: When you allocate too much USD assets, you can convert part of RMB, Euro and other legal currencies to diversify the foreign exchange risk of USD.
- Arbitrage: Exchange currency into another currency with higher interest rate
- Arbitrage: buy low and sell high or sell high and buy low