Foreign Exchange, as defined by Investopedia, is “the exchange of currency for another or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around the clock.” It’s popular with its abbreviation “forex or FX”. Malaysia’s currency is called Malaysian Ringgit. MYR is the currency code for Ringgit with a currency symbol of RM. The commonly used Ringgit exchange rate in the country is the USD from MYR rate.
The exchange rate is the price of Malaysian Ringgit with respect to other currencies like the USD or the United States Dollars for the USA or EURO for the United Kingdom. There exists a constant fluctuation of exchange rates of Ringgit as it is traded actively day by day. The market price for Malaysian Ringgit base on USD is 1Malaysian Ringgit for 0.22 USD or 1 USD for 4.46 Ringgit. Since December of last year, the exchange rate of Malaysian Ringgit in USD trends at the ranges 4.0 to 4.5 RM.
Exchanges in Ringgit mostly happen in a forex market. The foreign exchange market is a worldly disseminated market mainly for the trading of Malaysian Ringgit and other currencies. This comprises all matters of selling, buying and currency exchanges at actual or obtained prices. With a volume of trillion dollars each day, the forex market is considered to be the most substantial market in the world. The foreign exchange market does not establish the values of disparate currencies but allocates the actual price of Malaysian Ringgit’s value as demanded by another currency. Malaysia’s foreign exchange market helps international investments and trades by allowing currency conversion. The forex market is considered a unique market for several characteristics as follows: the enormous volume leads to a liquidity of higher value, dispersion in geography, twenty-four hours operation for seven days, variation of components influencing the exchange rates, low marginal relative earning compared to markets with definite income, and the use of techniques involving loaned funds in buying assets to increase yields. The main players in the Malaysian Market are security dealers and commercial banks which are the interbank foreign exchange market.
One factor affecting Malaysia’s foreign exchange market is the Commercial companies and their activities regarding finance and the economy of Malaysia. Examples of Commercial companies present in Malaysia are, Petronas (the nation’s oil and gas establishment conferred with the total oil and gas supply for Malaysia), AirAsia (low cost airline founded on 1993), AmBank (wholesale and retail banking), Astro Malaysia Holdings (entertainment company), Bursa Malaysia ( focuses on stock exchange founded on 1964). These companies trade minimal amounts with a lesser impact on the rate in the market compared to that of banking firms. Another factor is the central banks. The central bank of Malaysia, Bank of Negara, plays an important role forex. They are responsible for controlling the supply of money, interest rates and inflations happening in the economy of Malaysia. Bank Negara was established on January of the year 1959 with the main goal of issuing currency, serves as adviser and banker of the Malaysian Government and regulation of Malaysia’s credit system, cash policies and financial institutions. Bank Negara’s headquarter is situated in Kuala Lumpur. The central bank is also the one responsible for preparing and presenting updates and statistical information regarding the activities in the Malaysia’s economy.
Brokers in Malaysia are also players of foreign exchange in the country. Brokers are firms that demand a fee for performing purchasing and selling conditions submitted by investors. Forex brokers are institutions that provide a platform for trading to currency traders which permit them to purchase or sell currencies. PaxForex is a forex broker in Malaysia founded in the year 2011 which offers lower spreads and faster execution. They offer programs to support every member of their network to reach their goals. PaxForex has a 10 dollar deposit with a minimum of 0.3 spread and a maximum leverage of 1:500. Another broker is Swissquote Bank Ltd. Swissquote is one of the leading financial service providers. It gives advanced and original solutions and analyzing tools to reach the extensive scope of demands and necessities of the clients with 2000 dollars minimum deposit, 1.8 minimum spread, and a max leverage of 1:100. Oanda is also a forex broker in Malaysia. It is a financial service company driven by technology that carries value by spending in technological solutions. Oanda is founded in 1996 by Dr. Michael Stumm with the belief that the advancement in technology and the increasing knowledge of the internet would unlock the markets for trading and data. They were the first company to create inclusive information regarding currency exchange open for the public on the internet in 1996 and assisted the development of forex trading online in 2001. It requires a minimum deposit of 1 dollar, a minimum spread of 1.2 and a maximum leverage of 1:50.
There are three ways in which corporations, institutions, and individuals trade forex; Forward markets, spot market and futures market. The spot market is the place where traders buy and sell Malaysian Ringgit based on the latest price. Supply and demand determine the price which reflects things such as actual rates of interest, performance in the economy and the forecast of the performance of Malaysian Ringgit against other currencies. The futures market is a market in which the traders involve purchasing and selling of goods and services and contracts to be delivered on a certain date in the future. Forward Market is somewhat the same with the futures market. It is termed as an “over-the-counter” market that prepares the prices of assets to be delivered in the future. The difference between forward market and the futures market is that the former may be changed to fit the client’s requirements while the latter have fixed features. Forwards are conducted between a client and a bank or between banks while futures are between parties in a transaction. The spot market’s forex trading has always been the widest market due to its latent asset that the futures market and forwards market refers to. The breakthroughs in electronic trading, the increase in the activities in the spot market surpassed that of futures market which was the most favored platform for traders in the past.
Malaysia’s Economy has been growing over the years. With the help of technology, forex trading in the country and all other countries will be much easier than of the past.