Investing in currencies is a possibility to get other benefits. Naturally this is an option in which the risks are.

One possibility is the investment currency market, buying and selling foreign currency fluctuations by taking advantage of exchange rates. The exchange rate is the weight in the foreign exchange market of a particular currency expressing its value in another currency. For example, we can express the value of 1 euro is 1.17 dollars.


The foreign exchange market

To invest in the forex market has to sell one currency and buying another depending on the type of change. Thus, the foreign exchange market is organized channel to buy and sell currencies of different countries. The currencies are purchased to enable the following operations:

¤ To make payments for international business
¤ To travel to other countries or sightseeing.
¤ Return for buying and selling currencies speculating on changes in exchange rates.

The value of currencies

Keep in mind that the value of a coin (if it is completely flexible) is established from the supply and demand. When a currency has more value (and have to pay more for it) is seen, and when a currency loses value (and have to pay less for it) depreciates. A coin with a very high price and hurts imports favors exports, a depreciated currency favors very exports and tourism, hurting imports. Hence, it is important to find balance.

Exchange rate systems

Although the value of a currency in the forex market is established from the supply and demand, central banks intervene in those markets to establish a desired value. Thus, there are several exchange rates ranging between two extremes:
Fixed exchange rate: The central bank establishes a fixed exchange rate by intervening in currency markets to make its exchange rate remains unchanged, buying or selling excess supply or demand for that currency.
Flexible exchange rate: There is no intervention by the central bank, with the market who set a completely free exchange rate.

Exchange rates mixed

Usually the real situation is somewhere in between, ie without intervention for a fixed exchange rate, but timely interventions are made to prevent excessive changes. This form of exchange rates exchange rates is called mixed. There are several possibilities:

Exchange rate: In this system the change is not fixed but can fluctuate freely, although the central bank intervenes to prevent excessive fluctuations.
Adjustable peg: The exchange rate is fixed for a specified period, even when there are imbalances in the balance of payments, central bank intervenes from devaluing or revaluing the currency.
Fluctuation bands: Determine a band of fluctuations and the currency float freely within set limits. Having overcome these limits the central bank intervenes to place it within the band.

Investment in the currency market or Forex market

The fluctuation of different currencies is what allows investors to earn profits through speculation, buying and selling price, when possible, at a higher price. However, this type of investment has a certain amount of risk, like all such operations speculative.