Mauritius Online Forex

Forex unpacked

• What is forex?

  • Through its payment platform, Investec Bank Mauritius offers access to the market that allows you to trade currencies.
  • Users may access foreign exchange (forex) for their own account, their treasury management or their currency transfers.
    

• What is currency trading?

  • Currency trading is the act of buying and selling (trading) different currencies.
  • Currency trading presents the opportunity to profit from the fluctuations in currency values.
  • As technologies improve, the forex market has become more readily accessible resulting in an unprecedented growth in online currency trading.

• How does currency trading work?

  • The currency exchange rate is that at which one currency can be exchanged for another. The exchange rate represents the purchase price between two currencies.
  • The trade mechanics are like most markets, the only difference being that you're buying one currency and selling another at the same time.
    • A typical scenario might go something like this:
      A trader is looking at the British pound (GBP) and US dollar (USD). This is called a currency pair. Currencies are always quoted in pairs i.e. GBP/USD. Currency pairs are displayed with a bid/ask spread depending whether the currency is being sold or bought. In this example, the GBP is the base currency and the USD is the secondary currency. News that the value of the GBP is up from previous reports creates a positive reaction and a spike in the value of the GBP. This, in turn, will cause a rally on the GBP/USD currency pair. However, if the opposite occurred and a positive announcement for the USD was reported, then the GBP/USD currency pair would fall, or dip. Either scenario can offer up a profit, depending on which part of the currency pair is bought or sold.
  • Exchange rates fluctuate based on economic factors like inflation, industrial production and geopolitical events. These factors will influence the decision to buy or sell a currency pair.

• What can currency trading do for you?

  Forex is the world’s largest market and users may:

  • Trade currencies for their own personal portfolio
  • Fix an exchange rate for a future transfer in another currency (hedging)
  • Fix the exchange rate for an immediate transfer.

• Why currency trading is not for everyone

  • Trading currencies carries a high level of risk.
  • Institutions and individuals should be aware of the various types of risk exposure in forex transactions such as adverse changes in financial markets which may include exchange rate risk, interest rate risk, basis risk and correlation risk.
  • Before deciding to trade currencies, carefully consider your objectives, level of experience and risk appetite.
  • Remember, you could sustain a loss of some or all of your initial capital. If any doubt, seek advice from an independent financial adviser.