The term Forex market is used very frequently in the media as well as in day to day life. It conjures up an image of a huge historic building somewhere in Canary Wharf or on Wall street. However, that is not how the Forex market works. This market is very unique in many respect and to understand it, one first need to understand its unique characteristics. The unique characteristics of the Forex market are as follow: No physical existence, The stock markets and bond markets of the world have a physical existence, if you wanted to visit the New York Stock Exchange or the London Stock Exchange, there would be a historic building that you would end up visiting. However, this is not the case with Forex markets.

Forex markets do not have physical existence. This means there is no building where in the world where Forex dealers are located and have designated the place to be the Forex market. Instead, the Forex market is made up of money changers all over the world. The market is interconnected via means of information. Earlier, the information was transmitted manually, now the information is transmitted via electronic means. Therefore, the currency dealer in your neighborhood as well as in a far off place Mexico City together all constitute the Forex Market therefore constitutes an interconnected network of buyers and sellers.

There are some advantage of currency pegs for countries because its a credible and discipline monetary policy: Currency pegs are often popular in third world countries. Impoverished countries from South America, Asia and Africa have used currency pegs in the past. This is because this poor countries are also breeding grounds for corruption. Hence, this countries do not trust their local leaders with their monetary policy. There is a big Chance that the people that come to power may end up causing hyperinflation.