Foreign exchange is a growing and increasingly important aspect of international business relationships. This means it’s important for every business owner to understand how currency markets work and the tools they can use to make effective transactions. Watch this short video for a closer look at the history of foreign exchange and how you can get ahead. In 1971, most international currencies stopped being linked to the price of gold. It’s a growing, liquid and very quickly moving market, and for a lot of businesses, it’s an essential one.
But with sheer enormity comes a very high degree of volatility. You see, in a market that never sleeps, pricing never stops. Every second of every day, Monday to Friday, there’s a live quote for every actively traded currency in the world. This makes the ability of businesses to lock in a fixed rate for future payments and receipts a very valuable commodity. Knowing what crucial cash flows will be in the future allows businesses to manage their money and make forecasts with more certainty. Out of necessity, special tools have been developed for exactly this purpose. These tools, available through foreign exchange providers, are spot contracts, forward contracts and futures contracts.