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Commercial Companies

Commercial companies are usual participants in Forex trading but in comparison with banks or speculators they have small amounts at their disposal to trade in the Forex market. Their trading aims at obtaining the currencies necessary to pay for the exported and imported goods as well as to pay wages and salaries to people who work in their subsidiaries located in other countries.

If a commercial company is engaged in interest rate arbitrage it can make considerable profits from Forex trading. For example, if a company in New York decides to reap a benefit from much higher rates on London market it can favourably exchange a large sum of dollars for pounds sterling.

Whether the transactions conducted by a commercial company are considered to be small or large, they can quickly accumulate and may dictate a currency’s exchange rate with unpredictable outcomes.

Those companies which are occupied with the realization of the foreign trade operations are able to arrange the demand for the currencies of foreign countries as well as the supply for a national currency. If a company, on the contrary, deals with export operations it can provide the supply for the currencies of foreign countries and the demand for the national currency to pay salaries to workers, taxes and charges. All the currency balances will remain on their accounts in the form of deposits or securities. The companies can also raise foreign currency loans. However, these transactions are put into action through commercial banks.

There are commercial companies which trade in Forex to increase shareholder wealth such as Morgan Stanley, Goldman Sachs, JP Morgan Chase, Merril Lynch, Citigroup and other commercial companies that have large amount of stock holders.

The commercial companies which fulfill significant financial transactions with other countries may face a currency risk revealing itself in fluctuations due to substantial changes in the economics of these countries. Under such circumstances the companies can apply to hedging their businesses which is an affordable way to protect against unforeseeable price actions in the currency market.