Foreign Exchange Market to Grow by USD 516.48 Billion (2024-2028); Urbanization and Digitalization Driving Growth, Market Evolution Powered by AI - Technavio

NEW YORK, Dec. 18, 2024 /PRNewswire/ -- Report on how AI is driving market transformation - The global foreign exchange market  size is estimated to grow by USD 516.48 billion from 2024-2028, according to Technavio. The market is estimated to grow at a CAGR of  10.31%  during the forecast period. Growing urbanization and digitalization is driving market growth, with a trend towards 24x7 trading opportunities for foreign exchange. However, uncertainty of future exchange rates  poses a challenge. Key market players include Bank of America Corp., Barclays PLC, BNP Paribas SA, Citigroup Inc., Commonwealth Bank of Australia, DBS Bank Ltd., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase and Co., London Stock Exchange Group plc, NatWest Group plc, Societe Generale SA, Standard Chartered PLC, State Street Corp., The Bank of Nova Scotia, The Goldman Sachs Group Inc., UBS Group AG, Westpac Banking Corp., and XTX Markets Ltd..

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Key Market Trends Fueling Growth

The foreign exchange market operates continuously, providing traders with the opportunity to buy and sell currencies around the clock. This is due to the fact that trades are conducted electronically through a global network of computers, rather than at a physical exchange with set hours. The market's availability extends across different time zones, allowing transactions to take place even after major financial centers like New York have closed. Currencies are an essential component of international trade, central bank reserves, and multinational corporations. Since the abandonment of the gold standard in 1971, most currencies have floated freely, leading to a constant demand for foreign exchange trading. As a result, the market's 24/7 availability will contribute significantly to its growth in the forecast period.

The Foreign Exchange Market, also known as Forex, is a global financial platform where currencies are bought and sold. Prices constantly fluctuate based on economic events, trade balances, inflationary trends, and interest rate differentials. Major global banking institutions, multinational corporations, small businesses, individuals, retailers, and even retail traders participate in this 24-hour operation. Risk management solutions are essential for businesses and individuals engaging in foreign exchange transactions. Liquidity is crucial, with accessible platforms offering online trading in major currency pairs. Economic developments, financial crises, and strategic corporate activities impact currency price movements. Hedging strategies help manage risk, while personal finance, global commerce, international travel, online shopping, and foreign securities market investments are common reasons for individuals to participate. Currency swaps, monetary interventions, and speculation also influence the market. Non-financial customers, such as importers and exporters, rely on foreign exchange for international trade. Financial institutions cater to both institutional and individual clients, offering various services like interest rate differentials and investment flows management.

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Market Challenges

• Foreign exchange markets involve the buying and selling of different currencies. When trading internationally, the value of the foreign currency at the time of the deal may not be the same when payment is received. Exchange rate fluctuations can result in potential losses or gains for businesses. For instance, if a seller agrees to accept Euros for a shipment worth USD525,935 and the exchange rate is €0.85 per dollar, they expect to receive €425,000. However, if the Euro depreciates to €0.84, the seller will only receive €420,000, resulting in a USD5,000 loss. Conversely, if the Euro appreciates, the seller benefits from additional income. Most exporters prefer to minimize exchange rate risks rather than speculate. Interest rate differences between countries can influence exchange rates, creating opportunities for gains or losses. For example, rising Canadian interest rates may lead to a weaker US dollar against the Canadian currency. Such uncertainties could hinder market growth during the forecast period.
• The Foreign Exchange (Forex) market is a global decentralized marketplace for buying and selling currencies. It plays a crucial role in international transactions, including trade, tourism, and investment. However, several challenges impact Forex market dynamics. Balance of payments deficits and surpluses influence exchange rates. Economic indicators like inflationary pressures, GDP growth, and interest rates shape market perception and investor confidence. Political developments, terrorism threats, and geopolitical risks also impact Forex trading. Retail forex traders, investment managers, corporates, hedge funds, and wealth managers use various trading programs and advisory services to navigate these challenges. Modern technology and electronic platforms have made Forex trading more efficient, but they also expose participants to monetary policy responses, international cooperation, and regulations. Central banks, corporations, and interbank networks influence exchange rates through monetary policies and regulations. Inflation, GDP growth, and investor confidence are essential economic indicators that impact market sentiment. Market participants must stay informed about these factors to make informed decisions in the Forex market.

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Segment Overview

This foreign exchange market report extensively covers market segmentation by

1. Type 
• 1.1 Reporting dealers
• 1.2 Other financial institutions
• 1.3 Non-financial customers
2. Trade Finance Instruments 
• 2.1 Currency swaps
• 2.2 Outright forward and FX swaps
• 2.3 FX options
3. Geography 
• 3.1 North America
• 3.2 Europe
• 3.3 APAC
• 3.4 South America
• 3.5 Middle East and Africa

1.1 Reporting dealers-  The global foreign exchange market functions with financial institutions, known as reporting dealers, holding risky inventory positions during the maturity period. These dealers provide inter-day liquidity, buying and selling currencies at their posted bids and offering quotes throughout the trading day. Market institutions, including reporting dealers, hold foreign exchange stocks and participate in local and global markets. Reporting dealers generate returns by utilizing private customer information, with competition among liquidity providers maintaining market price stability. Dealers provide overnight liquidity, and accurate information about future currency movements is crucial for buyers, influenced by net buy or sell orders. Reporting dealers with informational advantages minimize liquidity risks, driving market growth during the forecast period.

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Research Analysis

The Foreign Exchange Market, also known as Forex or FX, is a global decentralized marketplace where currencies are bought, sold, and exchanged at current or determined prices. It involves the buying, selling, and conversion of one country's currency into another. Foreign exchange rates are determined by the supply and demand for currencies in the market, influenced by various factors such as economic indicators, political developments, interest rate differentials, international trade, and investment flows. Financial institutions, corporations, individuals, retailers, and other entities participate in this market for various reasons, including facilitating international trade, hedging against currency risk, and speculating on currency price movements. The market operates 24 hours a day, with the largest trading centers located in New York, London, Tokyo, and Singapore. Currency swaps, a type of borrowing and lending transaction, are also common in the forex market. The trading volume in the forex market is massive, with an average daily turnover estimated to be over USD6 trillion.

Market Research Overview

The Foreign Exchange Market, also known as Forex or FX, is a global decentralized marketplace where currencies are bought, sold, and exchanged. It plays a crucial role in the Foreign Securities Market by facilitating international transactions and enabling the conversion of one currency into another. Financial institutions and non-financial customers, including individuals, retailers, corporate institutes, and international trade entities, participate in this market. Currency swaps, interest rate differentials, monetary interventions, speculation, investment flows, economic indicators, political developments, risk appetite, inflationary pressures, and geopolitical risks influence foreign exchange rate movements. Retail forex trading, currency exchange services, remittance services, and IoT insurance market are part of the Forex ecosystem. Modern technology, including electronic platforms and trading programs, has made Forex trading more accessible and efficient. Monetary policies, regulations, and central banks play significant roles in shaping the market. Inflation, interest rates, GDP growth, investor confidence, market perception, and currency price movements are essential economic factors that impact the Forex market. Liquidity, 24-hour operation, and individual investors' participation add to the market's volatility and complexity. Multinational corporations, major currency pairs, online trading platforms, retail traders, and global economic developments are integral parts of the Forex market. Strategic corporate activities, hedging strategies, and risk management solutions are essential for managing currency risks.

Table of Contents:

1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation

• Type
• Reporting Dealers
• Other Financial Institutions
• Non-financial Customers
• Trade Finance Instruments
• Currency Swaps
• Outright Forward And FX Swaps
• FX Options
• Geography
• North America
• Europe
• APAC
• South America
• Middle East And Africa

7 Customer Landscape
8 Geographic Landscape
9 Drivers, Challenges, and Trends
10 Company Landscape
11 Company Analysis
12 Appendix

About Technavio

Technavio is a leading global technology research and advisory company. Their research and analysis focuses on emerging market trends and provides actionable insights to help businesses identify market opportunities and develop effective strategies to optimize their market positions.

With over 500 specialized analysts, Technavio's report library consists of more than 17,000 reports and counting, covering 800 technologies, spanning across 50 countries. Their client base consists of enterprises of all sizes, including more than 100 Fortune 500 companies. This growing client base relies on Technavio's comprehensive coverage, extensive research, and actionable market insights to identify opportunities in existing and potential markets and assess their competitive positions within changing market scenarios.

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SOURCE Technavio