Types of Transactions

Commercial Transactions
Manufacturing companies who buy in raw materials from abroad and export finished products undertake both the purchase and sales of foreign exchange, as they are always dependent upon the supplying companies’ country of origin and its currency for their invoicing. Whether acting as principles or intermediaries, the importers of goods will undertake purchases of foreign currency. Contractors involved in overseas projects are steady market participants, both buying and selling of foreign currency. Many other individuals or companies offering services overseas, such as international insurance, shipping, air transport and travel companies have need of frequent involvement in the market as well.

Funding
Besides the day-to-day funding requirements of their net currency cash flows, banks and multinational corporations require specific wholesale funding for their commercial loan or other foreign investment portfolios.

Hedging
While the hedging of an open currency exposure is frequently better handled through off-balance sheet products such as currency options, companies involved in direct commercial investment overseas, the purchase and maintenance of plant and materials, or financing the operations of foreign based subsidiaries, as well as individuals involved in the purchase and sale of property overseas, may seek foreign currency financing or may convert local currency funding via the foreign exchange market.

Portfolio Investment
This group includes banks and other entities involved in portfolio investment overseas or dealing in foreign securities, who will, for position establishment and profit realization purposes, both buy and sell foreign currencies.

Personal
Tourists, immigrants, and emigrants making outward and inward payments in foreign currency, and make up the bulk of retail foreign exchange business transacted in the market, along with royalties, commissions, patents and copyrights from abroad.