The foreign exchange (FX) market encompasses the conversion of purchasing power from one currency into another, bank deposits of foreign currency, the extension of credit denominated in a foreign currency, foreign trade financing, and trading in foreign c

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• How are foreign exchange transactions settled between international banks?
• Why does most worldwide interbank currency trading involve the U.S. dollar? Do you believe that the dollar may no longer be considered the international reserve currency? Discuss your reasons.
• Banks find it necessary to accommodate their clients’ needs to buy or sell FX forward, which in many instances is for hedging purposes. How can the bank eliminate the currency exposure it has created for itself by accommodating a client’s forward transaction?