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Types of Banks |
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Central Banks: The Bank of England, the European Central Bank, the Swiss national Bank, the Bank of Japan and, to a lesser extent, the Federal Reserve Bank often enters the market to correct unreasonably large movements, often in combination with one another. Their intervention, however, does not instantly balance supply and demand, but rather affects the present and future behavior of investors, signaling a desired exchange rate movement.
Trading Banks: These deal with one another in the interbank market, where they are obliged to make a two-way price (quote a buy & sell price). The bulk of today’s trading activity is concentrated between 100-200 banks worldwide out of a possible 2,000. These banks rely on their understanding of the market and their skill in assessing major trends in order to take advantage of them for speculative gain.
Commercial/Clearing Banks: These operate as international banks in the foreign exchange markets, as do many retail banks. In America, while legislation prohibits banks in certain states from maintaining branch networks, all banks have their affiliates or on the main dealing centers of New York, Chicago, and Los Angeles. Some commercial banks have sizable amounts of foreign exchange business to transact on behalf of their clients, and although they have their own dealing rooms they have not become involved in the interbank foreign exchange markets.
Regional/Correspondent Banks: Regional or correspondent banks do not make a market or carry positions, instead they turn to the larger money center banks to counteract their risk. These relationships have been built up over many years of mutually reciprocal service and the correspondent banks abroad act as the clearing agent in its own currency for the other bank involved.
Investment/Merchant Banks: The power of investment and merchant banks lies in their corporate finance and capital markets activities, which service the financial needs of large corporations rather than retail clients. Given the multi-currency sophistication of capital markets and the international spread of corporations, they frequently transact foreign exchange business either by dealing direct or through the broker’s market.
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| Symbol |
Rate |
| GBP:CHF |
1.747703 |
| GBP:JPY |
155.484239 |
| GBP:USD |
1.638403 |
| NZD:USD |
0.627050 |
| EUR:CAD |
1.545998 |
| EUR:CHF |
1.516857 |
| EUR:GBP |
0.867915 |
| EUR:JPY |
134.947096 |
| EUR:USD |
1.421994 |
| AUD:JPY |
76.394373 |
| AUD:USD |
0.805000 |
| USD:CAD |
1.087204 |
| USD:CHF |
1.066711 |
| USD:JPY |
94.899879 |
| USD:SEK |
7.613010 |
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History