Question

1. What is foreign exchange market?
2. Why are developing nations at weaker side of negotiations in foreign trade?

Answer 1

The foreign exchange market refers to the market where any country of the world can exchange (buy or sell) currencies for other foreign currency. It is also known as the FX market. The rate of the countries' currencies is measured or determined by the FX.

Developing nations are on the weaker side of negotiations in foreign trade because, in international or foreign trade, there is the large involvement of a stronger economy or nation (like the US and China) and to compute with a stronger economy is too hard for the developing nations. The predominance of a strong economic nation in foreign trade (production of goods and services) is the main reason for the weakness of developing countries. The rules and regulations of WTO(world trade organization) for foreign trade is also not favorable for the developing nations.