Role Of Commercial Banks In Forex Markets

Commercial banks play two roles in the FOREX market:
(1) They facilitate transactions between two parties, such as companies
wishing to exchange currencies (consumers), and
(2) They speculate by buying and selling currencies. The banks take positions
in certain currencies because they believe they will be worth more (if “buying
long”) or less (if “selling short”) in the future. It has been estimated that
international banks generate up to 70% of their revenues from currency
speculation. Other speculators include many of the worlds’ most successful
traders, such as George Soros.