Question

Discuss how banks use forex trade to maximise their profits

Answer 1

banks are one of the largest players in Forex trades. They can impact the rates directly because of the volume that they trade. Banks only make up 5% of the total number of forex traders, but more importantly banks account for 92% of all forex volumes.

When banks act as dealers for clients In forex market, the bid-ask spread represents the bank's profits. Trading in currencies also provides diversification to a portfolio mix of the bank.

Also, Banks hedge their accounts using forex future contracts thus reducing the losses. (If they are giving loans to companies from abroad)

Also, Banks have teams of specialized traders who keep trading for the profits.

Also, banks trade currencies for large accounts such as pension funds, foundations, and endowments etc.