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A Foreign Exchange Market is basically a place where buying and selling of different foreign currencies take place. It is normally considered as one of the most liquid markets in the world where institutions such as banks, central banks, government, speculators, corporations etc trade.
A Foreign Exchange market has a number of levels. There is inter-bank market on the top. In this market only the large investment banks trade. The rates of the Foreign Exchange market are set of Balance of payments model, the international parity conditions and Asset market model.
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