Concept
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Currency marketsrefer to financial markets that institutions use to trade various world currencies. Effectively, the currency markets enable these institutions to convert one national currency into another, thereby enabling these institutions to participate in international trade and investment. They also facilitate the crucial supply of currency for foreign exchange reserves, which are required by governments and central banks to hold in order to pay for foreign trade and investment.Two primary avenues for trading in currency markets, are spot markets, and futures markets. Spot markets refer to markets in which the trade of instruments or commodities that are for immediate transfer are made. Futures markets refer to marketplaces in which the trade ofinstruments or commodities that are for future delivery are made. The instruments traded in these markets are called futures contracts. Futures contracts are traded instruments which stipulate the transfer of a specific instrument or commodity, at a specific quantity and quality, at a specific date in the future.