Participants

Exporters | Importers | Fund Managers | Non-Banking Institutions
Global Fund Managers | Forex Banks | Government Central Banks
Other Government Agencies | Speculative Traders

The Forex market is primarily driven by groups that exchange currency as part of their day-to-day operations.

Let's look at some of the players in the forex market.

Exporters

Exporters are made up of a diverse range of companies exporting goods and services. If you check national export volumes you'll get an excellent indication of how much foreign exchange is transacted by this group. It is spear headed by the resource sector companies. Generally, exporters have a positive impact on the value of a country's currency.

Importers

Importers use the foreign exchange markets to purchase foreign currency to make payments for the goods and services they have bought in other countries. They generally have a negative impact on the value of a country's currency.

Fund Managers

The net effect of this group depends on the investment decisions they make. With the growth of the FX industry they have been, where possible, investing heavily in foreign securities and other foreign financial instruments. This has a tendency to generate a negative impact on the local currency. However Fund Managers can hedge their investments. When they do so, you often see them enter the market as buyers of forwards contracts and options.

Non-Banking Financial Institutions

This group is composed of financial corporations, such as Cambridge Mercantile, which deal in specialty services primarily related to international finance. Their knowledge in international finances makes them specialists in dealing with multinational financial concerns such as foreign exchange. They can generally provide a better range of pricing and services to small/medium sized enterprise than the banks.

Global Fund Managers

This group's influence changes depending on their interest in national asset markets. During periods where local stocks and bonds are attractive and the national economy gets substantial allocations of global capital from Global Fund Managers, the value of the country's currency is driven up. However, when this group wishes to hedge existing investments, they can generate selling flows.

Banks

Banks are commercial institutions licensed as takers of deposits. These banks are mainly concerned with making and receiving payments. However, they also support a variety of other services including foreign exchange. These banks will trade currencies among themselves as part of the system of balancing accounts. While exchange rates for their largest customers are extremely competitive, small and medium sized enterprises and individuals will typically pay a large premium when transacting foreign exchange with their local branch.

Government Central Banks

Using Canada as an example, the Canadian Central Bank generally lets the market determine the value of the Canadian Dollar. But there are a few exceptions to this policy. The Central Bank will intervene to buy or sell Canadian Dollars if they believe it is substantially under or overvalued and that it is having a negative effect on the economy.

Other Government Agencies

Many government agencies have foreign exchange risk either as exporters, importers or borrowers.

Speculative Traders

This group buys and sells currency for traders and forex banks. Cambridge is not involved in speculative activity. Our business is global payments.