International Financial Market

International financial market serves as link between the financial market of each country and as dependent markets outside the jurisdiction of any given country. The market of currencies is the heart of this international financial market. Structure and functions of the foreign currency market, the international money market and international security market dominates financial markets and trade flow. International trade and investment are often denominated in a foreign currency, so the purchase of the currency proceeds the purchase of goods, services and assets. 

Exchange rate is the most important instrument in international business which determine one country’s currency in terms of another country’s currency. International business requires purchase of country’s currency before purchasing goods, services or assets. Therefore, proper understanding of exchange rates and exchange rate market, exchange rate quotations and terminology is very important to conduct international business. Today’s chain banking system deals all foreign exchange rate traders at banks can move million of dollars, yen and marks around the world quickly in a few keystroke on their network computer. 

Monitory system of the twentieth century lies upon gold standard began sometimes in the 1880s and extended up through the breakout of First world War. Under the gold standard each country’s currency would be set in value per ounce of gold. Gold standard was premised on three basic ideas below: 

. A system of fixed rates of exchange existed between participating countries. 

. Money issued by member countries had to be backed by reserve of gold.

. Gold would act as an automatic adjustment, flowing in and out of countries, and automatically altering the gold reservers of that country if imbalances in trade and investment did occur. 

Before entering into a foreign business, this is very important to understand the proper definition of international financing and it’s characteristics, International banking and bank lending, structure of international banking, offshore banking, International security market, international bond market, international equity market, private placements and other determinants to gain access of international financial markets.