InvestorQ : What are currencies and what is the currency market in India?
Niraja Mehta made post

What are currencies and what is the currency market in India?

Mahil Khan answered.
3 years ago

Currencies are normally unique to any country (Euro is an exception where a host of European nations share the same currency). Every country issues its own currency which is normally issued by the central bank of the country e.g. RBI in case of India, Federal Reserve in case of the US, and Bank of England in case of UK etc. The only exception is the Euro region which uses a common currency called the Euro. For example, big nations like Germany, France, Italy, Spain, and Netherlands have all given up their own currencies and are now using the common currency Euro.

In the days of barter, goods were exchanged for goods. Hence there was no need for a currency. When currency was first invented it was in the form of gold, stones and even cotton bales. The issue of currency is the sovereign right of any government and that is why each currency has a different value. The value of any currency is an index of its economic strength and its trade surplus. Normally, countries with large trade surpluses will have strong currencies. Japan is a classic example.

For a long time there was no recognized market for trading in currencies or in currency futures. Forex trading in India was restricted to the rupee forward market that was largely an inter-bank market. Currency trading in India picked among small and medium sized investors after the introduction of currency futures on the stock exchanges like NSE and the BSE. Globally, the currency trading volumes are in excess of $5 trillion but the Indian currency market is still quite small by global standards.