Currency Trading: Positive Role in Global Economy

Running Head: CURRENCY TRADING 1
History of Money
Name
Affiliation
Date

CURRNECY TRADING 2
Currency trading generally has negative effects on national
governments and their economies Vs Currency trading plays a
positive role in the global economy.
Introduction
Currency trading means the exchange of one currency for another
currency by Nations in the foreign exchange market. Currency trading can be
called foreign exchange which is also abbreviated as Forex. It is usually
carried out at foreign exchange markets and the main goal of the
participants is to gain profits (Tim Parker, 2019). Usually when someone is
moving from one country to another, currency trading is considered useful.
Foreign exchange is considered the world’s greatest and most profitable
business since about $2 trillion is traded each day (Tim Parker, 2019). The
traders in the foreign markets are usually trade makers and brokers who
trade on behalf of investors. However, banks are also very important dealers
in the foreign exchange market. Currency trading occurs when there is
buying and selling of one country’s currency for another country’s currency
(Tim Parker, 2019). As per the argument, I say currency trading plays a
positive role in the global economy. The reason for this stand is backed up by
the three positive roles of currency trading which are; the Transfer function,
the credit function and the hedging function (Tim Parker, 2019).
Currency trading in foreign exchange markets is used in Transfer
function. This is the most valuable and important role of currency trading in

CURRNECY TRADING 3
the financial markets of the economy (Ozdemir & Gumussoy, 2017).
Currency trading helps to exchange the funds from the foreign money to the
indigenous kind of currencies. The exchange of currencies helps to settle
debts, fresh payments and encourage both international trade and home
trade in an economy which is comprised of investors from different countries.
Such payments can be made through instruments of credit. These
instruments of credit may include the following; telephone transfers, foreign
exchange bills, bank drafts among other forms of payments. Also, transfer of
currencies does not need many brokerage funds and fees for exchange.
Some brokers in the currency trading gain profits through commission as
bidding the amount in different currencies. This helps to motivate investors
or traders across countries to carry out efficient market exchange to yield
more profits. For instance, when the business man from India gets goods
from United States of America, the transactions are made in US dollars. But
when converting Rupee for India, the payments need to be converted to
dollars by the use of FOREX (Ozdemir & Gumussoy, 2017). With this foreign
exchange, the transfer of goods and services is smoothened rather than
depending on one currency.
Furthermore, currency trading facilitates credit function. Credit
function involves the offering of short-term credit to the business men
especially the importers. Short-term credit offers helps alter the flow of
goods and services by the importers and exporters in the transaction
process. Most of the importers require credits in order to fund the purchases