Question

Very Short Answer Type Questions:
State the three functions of foreign exchange market.

Answer 1

Functions of foreign exchange market are:

1) Transfer function : It implies transfer of purchasing power in terms of foreign exchange across different countries of the world.

2) Credit function: It implies provision of credit in terms of foreign exchange for the export and import of goods and services across different countries of world.

3) Hedging function: It implies protection against the risk related to fluctuations in foreign exchange rate.