Introduction

The foreign exchange market is the largest financial market on Earth. According to the Bank for International Settlements' 2025 triennial survey, daily turnover reached $9.6 trillion in April 2025, up from $7.5 trillion in 2022 and $6.6 trillion in 2019. To put that number in context: the New York Stock Exchange trades roughly $25 billion per day. Global bond markets trade roughly $1 trillion per day. The forex market dwarfs both combined.

Despite its size, forex is invisible to most people. There is no exchange building. There is no opening bell. There is no closing price on the evening news. The market operates over-the-counter, between banks, through electronic platforms, across time zones, 24 hours a day, five days a week. It is the circulatory system of the global economy: every international trade, every cross-border investment, every foreign vacation involves a currency transaction somewhere in the chain.

Part One: Why Currencies Have Different Values

The Fundamental Drivers

An exchange rate is a price: the price of one currency in terms of another. Like any price, it is determined by supply and demand. But the supply and demand for currencies are driven by a specific set of factors.

Interest rate differentials are the primary short-term driver. When a country's central bank raises interest rates, foreign investors can earn higher returns on deposits and bonds denominated in that currency. Capital flows in. Demand for the currency increases. The currency appreciates. This is why every forex trader on Earth watches the Federal Reserve, the European Central Bank, and the Bank of Japan. A 25 basis point rate change can move trillions in capital.

Inflation differentials drive long-term trends. A currency's purchasing power is eroded by inflation. If Country A has 2% inflation and Country B has 10% inflation, then over time, Country B's currency will depreciate against Country A's. This is the mechanism behind purchasing power parity (PPP), the theory that exchange rates should adjust so that identical goods cost the same in different countries. In practice, PPP works as a long-run anchor (currencies eventually gravitate toward it) but is a poor short-run predictor (deviations can persist for years).

Trade balances matter. A country that exports more than it imports receives foreign currency in payment, which must be converted to the domestic currency. This creates demand for the domestic currency. Persistent current account surpluses (Germany, Japan historically) tend to strengthen a currency. Persistent deficits tend to weaken it. Thailand's current account deficit reached 8% of GDP in 1996. The baht crisis followed less than a year later.

Capital flows are the "asset market" driver. Exchange rates reflect relative demand for assets denominated in each currency. If global investors want to buy U.S. equities and Treasuries, they need dollars. This demand strengthens the dollar independent of trade flows. The U.S. runs large trade deficits but maintains a strong currency in part because the world wants to own dollar-denominated assets.

Political stability and institutional quality form the background condition. Countries with independent central banks, credible legal systems, and property rights attract investment. Political uncertainty triggers capital flight. When investors lose confidence in a country's institutions, they sell the currency first and ask questions later.

Why the Dollar, Euro, Yen, and Pound Dominate

Global foreign exchange reserves, as reported by the IMF in 2024: the U.S. dollar holds 58%, the euro 20%, the Japanese yen 6%, the British pound 5%, and the Chinese renminbi 2%. The dollar appears on at least one side of 89.2% of all forex transactions.

This dominance is not accidental. It reflects economic size (these currencies represent the world's largest economies), deep financial markets (the U.S. Treasury market is the most liquid in the world), institutional credibility (independent central banks, rule of law, enforceable property rights), and network effects (once a currency dominates trade invoicing and reserves, the dominance is self-reinforcing because counterparties everywhere will accept it). The dollar's position was institutionalized at Bretton Woods in 1944, survived that system's collapse in 1971, and has been reinforced by the petrodollar arrangement and the depth of U.S. capital markets.

Why Some Currencies Collapse

The Turkish lira traded at roughly 1.5 per dollar in 2010. By late 2024, it was 34 to 35 per dollar. The cause was straightforward: President Erdogan held the unorthodox belief that high interest rates cause inflation (the inverse of standard economics). He repeatedly replaced central bank governors who raised rates. Under political pressure, the central bank cut rates from 19% to 14% in late 2021. The lira lost 44% of its value that year alone. Inflation peaked at 83% in late 2022. Turkey's heavy dependence on imported energy meant that the falling currency fed directly into consumer prices, creating a vicious cycle.

Argentina's peso has been chronically unstable for decades, through multiple defaults and hyperinflation episodes. By 2023, inflation reached 211%. When President Milei took office in December 2023, he immediately devalued the peso by 54%, moving the rate from 365 to 800 per dollar. He implemented a crawling peg depreciating 2% per month, later reduced to 1% per month.

Nigeria maintained the naira at an artificially high official rate for years through strict capital controls, creating a large black market premium. In June 2023, the government floated the currency. The naira lost 25% in a single day. By the end of 2024, it had depreciated 129% for the year, crossing 1,500 per dollar. Food inflation reached 40%.

The pattern in each case is the same: institutional failure (loss of central bank independence, unsustainable pegs, capital controls to mask underlying weakness) leads to a loss of confidence, which leads to capital flight, which leads to depreciation, which leads to inflation, which leads to further loss of confidence. The spiral is self-reinforcing and extremely difficult to stop once it begins.

The Impossible Trinity

A country cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. It can have any two, but not all three. This is the impossible trinity (or trilemma), and it is the most important structural constraint in international finance.

The United States has free capital movement and independent monetary policy, so it cannot have a fixed exchange rate (the dollar floats). China has a managed exchange rate and independent monetary policy, so it must maintain capital controls (Chinese citizens face strict limits on moving money out of the country). The eurozone has a fixed exchange rate (the single currency) and free capital movement, so individual member states have no independent monetary policy (the ECB sets rates for all members, regardless of whether Greece needs looser policy or Germany needs tighter policy).

Attempts to maintain all three always fail. Britain joined the European Exchange Rate Mechanism in 1990 (fixed rate) with free capital movement, and discovered it could not also maintain an independent monetary policy when domestic conditions diverged from German conditions. The result was Black Wednesday in 1992. Thailand maintained a dollar peg with an open capital account and tried to run independent monetary policy. The result was the 1997 Asian crisis. The trilemma is not a suggestion. It is a law.

Part Two: How the Market Actually Works

No Exchange, No Building

The forex market has no central exchange. Unlike the NYSE or CME, there is no single location where trades happen. It is an over-the-counter (OTC) market: a decentralized network of participants trading directly with each other, electronically, through phone lines, and through electronic broking platforms. There is no official opening or closing price. There is no single price at any given moment. Different participants may see slightly different prices depending on who they are trading with.

The Dealer Banks

The core of the market is a small number of major dealer banks that "make markets" by quoting two-way prices (a bid price at which they will buy, and an ask price at which they will sell) to their clients and to each other. The 2025 Euromoney survey ranked the top dealers by volume: JP Morgan (first for the third consecutive year), UBS, Deutsche Bank, Citi, State Street, Goldman Sachs, HSBC, and Bank of America. These eight banks handle a large majority of global forex flow.

The inter-dealer market (where these banks trade with each other) accounts for roughly 46% of global turnover. Trades between dealers and other financial institutions account for another 50%. Non-financial customers (corporations hedging their international business) represent only about 4% of total volume.

Electronic Trading Platforms

Most trading now happens electronically. The two dominant inter-dealer platforms are EBS (Electronic Broking Services, now part of CME Group) and Refinitiv Matching (formerly Reuters Matching, now part of the London Stock Exchange Group). EBS dominates in EUR/USD, USD/JPY, EUR/JPY, USD/CHF, and EUR/CHF. Refinitiv dominates in GBP/USD, USD/CAD, AUD/USD, and NZD/USD. The two platforms have roughly partitioned the major currency pairs between them.

For dealer-to-client trading, multi-dealer platforms like FXall (LSEG), Currenex, and Bloomberg FX allow institutional clients to request quotes from multiple dealers simultaneously and trade with the best price. Single-dealer platforms, built and maintained by individual banks, serve their largest clients directly.

Algorithmic and high-frequency trading has transformed the market. Proprietary trading firms use automated systems to execute trades in milliseconds, exploiting tiny price discrepancies across platforms. These firms now account for a significant share of volume on electronic platforms.

Settlement: CLS

When two parties agree on a forex trade, the actual exchange of currencies (settlement) happens later, typically two business days after the trade date (known as T+2). The problem: if Bank A sends dollars to Bank B and Bank B is supposed to send euros to Bank A, but Bank B fails before sending the euros, Bank A has lost its dollars. This is settlement risk (or Herstatt risk, named after a German bank that failed in 1974 mid-settlement, leaving counterparties exposed).

CLS (Continuous Linked Settlement) was created in 2002 to solve this problem. CLS settles both legs of a trade simultaneously: neither party's payment is released until both payments are confirmed. It operates in 18 currencies and settles over $6.5 trillion per day, covering the majority of interbank forex transactions. CLS does not trade. It settles. It is the plumbing that prevents the system from seizing up.

The 24-Hour Cycle

The market trades continuously from Sunday 22:00 UTC (Sydney open) to Friday 22:00 UTC (New York close). Trading follows the sun through four major sessions.

Sydney opens the week. Volume is relatively low. Tokyo follows, with peak activity in yen crosses (USD/JPY, AUD/JPY). London opens at 08:00 UTC and accounts for approximately 38 to 43% of all global forex volume, making it the single most important trading center on Earth. New York opens at 13:00 UTC and is the second-largest center.

The critical window is the London-New York overlap (13:00 to 17:00 UTC). More than half of daily global forex volume occurs during these four hours. Liquidity is deepest, spreads are tightest, and major market moves often originate in this window. The thinnest liquidity occurs during the late New York to early Sydney gap, when only Asian-Pacific traders are active.

Types of Transactions

Not all forex trades are the same.

Spot transactions (28% of turnover) are the simplest: exchange one currency for another at the current market rate, settled in two business days. When you exchange dollars for euros at an airport, that is a spot transaction (at a terrible rate, with a wide spread that is the bureau de change's profit).

FX swaps (51% of turnover, the largest category) involve two simultaneous transactions: a spot purchase and a forward sale (or vice versa) of the same currency pair. Banks and corporations use swaps to manage short-term funding needs. A European bank that needs dollars for a week will swap euros for dollars now and agree to swap back in a week, with the price difference reflecting the interest rate differential between the two currencies.

Outright forwards (15% of turnover) are contracts to exchange currencies at an agreed rate on a future date. Corporations use these to hedge. If an American company knows it will receive 10 million euros in three months, it can lock in today's exchange rate with a forward contract, eliminating the risk that the euro depreciates before the payment arrives.

Options and other instruments (6% of turnover) give the holder the right (but not the obligation) to exchange at a specific rate. Options are used for both hedging and speculation.

Part Three: The Participants

Central Banks

Central banks account for less than 1% of daily volume directly. Their importance is entirely disproportionate to their trading activity. When the Bank of Japan intervenes to support the yen, it can spend tens of billions of dollars in a single session. More importantly, central bank policy announcements (rate decisions, quantitative easing programs, forward guidance) are the single most powerful drivers of exchange rate movements. Every forex participant on Earth watches the Fed, the ECB, the BOJ, and the BOE.

Central banks also hold and manage foreign exchange reserves. Global FX reserves total roughly $12 trillion. The composition of these reserves (how much is in dollars versus euros versus yen) is itself a market force. When central banks shift reserve allocations, they move billions.

Dealer Banks

The major dealer banks are market makers: they stand ready to buy or sell at quoted prices, earning the bid-ask spread. They also run proprietary trading desks that take directional views on currencies. Their dominance of the market gives them an information advantage: by seeing the flow of customer orders, they can infer market direction before it is reflected in prices.

Hedge Funds

Macro hedge funds take large directional bets on currencies based on macroeconomic analysis. George Soros's Quantum Fund is the archetype (see Part Four). Commodity trading advisors (CTAs) use systematic, algorithm-driven trend-following strategies. Together, hedge funds and proprietary trading firms account for roughly 7% of global volume but have outsized influence on short-term price movements because their trades are directional (speculative) rather than driven by commercial hedging needs.

Corporations

Non-financial corporations are a small share of volume (about 4%) but represent the real economy's engagement with the forex market. Airbus earns revenues in dollars (airlines pay in dollars) but incurs costs in euros. It must sell dollars and buy euros, and the rate at which it does so directly affects profitability. Boeing faces the reverse. Both use forwards and swaps to hedge, and their hedging activity is a steady, predictable component of market flow.

Retail Traders

Retail forex trading has grown significantly since online brokers made it accessible. An estimated 9.6 million individuals trade forex globally. They account for roughly 5 to 10% of total volume. Retail traders access the market through brokers that aggregate their orders and pass them to the interbank market (or, in many cases, take the other side of the trade themselves). Retail spreads are wider than institutional spreads, and the majority of retail forex traders lose money. Studies consistently find that 65 to 80% of retail forex accounts are unprofitable.

Part Four: History

Bretton Woods (1944-1973)

In July 1944, delegates from 44 Allied nations met at Bretton Woods, New Hampshire, and constructed the post-war monetary order. All currencies would be pegged to the U.S. dollar. The dollar would be convertible to gold at $35 per ounce. The International Monetary Fund and World Bank were created to manage the system.

The system worked through the 1950s and 1960s. But the Triffin Dilemma created an inherent contradiction: for the dollar to serve as a global reserve currency, the U.S. had to run persistent balance-of-payments deficits (supplying dollars to the world). But persistent deficits undermined confidence in the dollar's gold convertibility. By the late 1960s, the U.S. had printed far more dollars than it held gold to back them.

On August 15, 1971, President Nixon unilaterally closed the gold window, ending dollar-gold convertibility. He imposed a 10% import surcharge and wage and price controls. The Smithsonian Agreement of December 1971 attempted to re-establish fixed rates with wider bands and a devalued dollar. Nixon called it "the greatest monetary agreement in the history of the world." It lasted fourteen months. By March 1973, speculative pressure had broken the new bands, and the G-10 approved floating exchange rates. The modern forex market was born.

Soros and Black Wednesday (1992)

Britain joined the European Exchange Rate Mechanism in October 1990, pegging the pound at 2.95 Deutsche marks. The rate was widely considered overvalued. British inflation was triple German inflation. The ERM required the pound to stay within 6% of its central rate.

German reunification forced the Bundesbank to raise rates to fight inflation. Britain was in deep recession and needed to cut rates. The impossible trinity was in play: Britain had a fixed exchange rate and free capital movement, leaving it no room for independent monetary policy.

George Soros's Quantum Fund and other speculators accumulated massive short positions in sterling. On September 16, 1992, the Bank of England raised rates from 10% to 12% in the morning and announced a further rise to 15% that afternoon. Markets continued selling. By evening, Britain had spent roughly 27 billion pounds of reserves trying to defend the peg. At 7:00 PM, Chancellor Norman Lamont announced Britain's withdrawal from the ERM. The pound immediately fell 15% against the mark and 25% against the dollar. Soros earned over 1 billion pounds. The episode cost the British Treasury an estimated 3.3 billion pounds.

The irony: freed from the overvalued peg, with lower rates and a cheaper currency, the British economy recovered quickly through 1993 and 1994. The failed peg was the problem, not its collapse.

The Asian Financial Crisis (1997)

Thailand maintained a peg to the U.S. dollar while running a current account deficit of 8% of GDP. Its financial sector was overleveraged with foreign-currency debt. Export growth had slowed to 1.9% in 1996 from nearly 25% the year before. On July 2, 1997, Thailand was forced to float the baht. It fell from 25 per dollar to 56 per dollar by January 1998, a decline of more than 50%.

The crisis spread to Indonesia, South Korea, Malaysia, and the Philippines. Foreign debt-to-GDP ratios in the four large ASEAN economies had risen from 100% to 167% between 1993 and 1996, then shot above 180% during the crisis. The IMF organized bailouts: $20 billion for Thailand, $40 billion for Indonesia, $59 billion for South Korea. Indonesia's GDP fell approximately 13% in 1998.

The lesson Asian central banks absorbed was to accumulate massive foreign exchange reserves as self-insurance against future crises. This reserve accumulation, predominantly in dollars, became one of the structural pillars of continued dollar dominance.

The Swiss Franc Shock (2015)

On September 6, 2011, the Swiss National Bank set a floor of 1.20 Swiss francs per euro. The franc had surged as a safe haven during the eurozone debt crisis, threatening Swiss exporters and risking deflation. To maintain the floor, the SNB had to continuously buy euros and sell francs, ballooning its balance sheet to hundreds of billions.

By January 2015, the ECB was about to launch massive quantitative easing, which would weaken the euro further. The SNB faced the prospect of buying ever-larger quantities of euros at an accelerating rate. On January 15, 2015, with no advance warning, the SNB abandoned the floor.

The franc surged approximately 30% against the euro in minutes, briefly reaching parity. Against the dollar, it gained 25% before settling at roughly 12% higher. The Swiss stock market fell more than 10%. Several retail forex brokers failed immediately. FXCM required a $300 million emergency loan. Alpari UK went into administration. Client accounts that had been levered 50:1 or 100:1 were wiped out, and in many cases, clients owed their brokers money beyond their deposits.

The Yen Carry Trade Unwind (2024)

For decades, Japan maintained near-zero or negative interest rates. From 2022 onward, the Bank of Japan held rates at -0.1% while the Federal Reserve raised rates to 5.25-5.50%. This enormous interest rate differential created a massive carry trade: borrow yen at near-zero cost, convert to dollars, invest in U.S. assets earning 4 to 5%. By mid-2024, the carry trade was estimated at approximately 40 trillion yen (roughly $250 billion).

USD/JPY reached 161.62 on July 3, 2024, the weakest yen in 38 years. On July 31, the BOJ unexpectedly raised its policy rate to 0.25%. Two days later, a weaker-than-expected U.S. jobs report raised recession fears. The carry trade began to unwind.

The unwind was self-reinforcing. Carry traders needed to buy yen to repay their yen-denominated borrowings, which strengthened the yen, which triggered more forced buying, which strengthened it further. On August 5, the Japanese TOPIX index fell 12% in a single day, the worst since 1987. The VIX briefly hit levels not seen since the March 2020 COVID crash. USD/JPY fell to 140.66 by September 16: a 14% yen appreciation in less than two months. The shockwaves hit equity markets, emerging market currencies, and commodities globally.

Part Five: The Carry Trade

The carry trade is one of the most important dynamics in the forex market, and it deserves its own examination because it connects interest rates, exchange rates, and financial stability in ways that are not immediately obvious.

The Mechanism

Borrow in a currency with low interest rates (the "funding currency"). Convert to a currency with high interest rates (the "investment currency"). Invest in that country's assets. Earn the interest rate differential. If you borrow yen at 0.1% and invest in Australian dollars earning 4.5%, you earn a 4.4% spread before accounting for exchange rate movements.

The classic funding currencies are the Japanese yen (near-zero rates from 1995 to 2024), the Swiss franc (negative rates from 2015 to 2022), and the euro during its negative rate period (2014 to 2022). The classic investment currencies are the Australian dollar, New Zealand dollar, Brazilian real, Mexican peso, South African rand, and Turkish lira.

Why It Works (Until It Doesn't)

Standard economic theory predicts that carry trades should not work. If Country A has higher interest rates than Country B, the theory of uncovered interest rate parity says Country A's currency should depreciate by exactly the interest rate differential, eliminating the profit. In practice, this does not happen. High-interest-rate currencies tend to appreciate in the short to medium term, not depreciate. This is the "forward premium puzzle," one of the most robust anomalies in financial economics. Carry trades are profitable on average.

The risk is in the tail. Carry trade returns are positively skewed for long periods (steady small gains) and then violently negatively skewed (sudden large losses). The August 2024 yen unwind is the textbook example: years of steady carry income erased in two weeks. The distribution of carry trade returns resembles selling insurance: small regular premiums punctuated by occasional catastrophic payouts.

Unwind Dynamics

Carry trade unwinds are self-reinforcing through a feedback loop. The funding currency strengthens slightly. Carry traders mark losses. Margin calls or risk limits force liquidation. Liquidation requires buying the funding currency (to repay the loan) while selling investment assets. This further strengthens the funding currency. The cycle repeats. Build-up happens gradually over years. Unwinds happen in days. The August 2024 acute phase lasted roughly two weeks.

Part Six: How Exchange Rates Affect Ordinary Life

Import Prices and Inflation

When a currency depreciates, imported goods become more expensive. The degree to which exchange rate changes translate into consumer prices ("pass-through") is higher in small, open, import-dependent economies than in large, relatively closed ones. After the post-Brexit sterling depreciation in 2016, half of the subsequent CPI increase in the UK was driven by items with more than 25% import intensity. In Nigeria, the naira's 129% depreciation in 2024 pushed food inflation to 40% and overall CPI to 35%. In Turkey, heavy energy import dependence meant lira depreciation fed directly into consumer prices, with inflation hitting 83%.

Developing Nation Debt

Most sovereign debt in developing countries is denominated in dollars or euros, a problem economists call "original sin" (the inability to borrow in one's own currency). When the domestic currency depreciates, the local-currency cost of servicing foreign debt rises in exact proportion. Nigeria's naira devaluation in 2024 increased the naira-denominated value of its foreign debt by an estimated 30 trillion naira. Countries face a "double squeeze": rising interest rates in developed countries attract capital away from emerging markets (weakening their currencies) while simultaneously raising the cost of refinancing dollar-denominated debt.

Corporate Profits

Multinationals earning revenues in foreign currencies face "translation risk." When the dollar strengthens, revenues earned in euros, yen, or pounds are worth fewer dollars when converted. American tech companies with significant international revenue (Apple, Microsoft, Google) regularly cite currency headwinds in earnings reports. Conversely, European and Japanese exporters benefit from weaker home currencies: a weaker euro makes a Volkswagen cheaper in dollar terms.

Tourism

Currency depreciation makes a country cheaper for foreign tourists and more expensive for domestic residents traveling abroad. Tourism spending accounts for roughly 5% of GDP globally on average but up to 25% for tourism-dependent economies. A strengthening dollar makes the entire non-dollar world cheaper for American tourists and more expensive for everyone visiting the United States.

The Invisible Tax

Most people never think about exchange rates until they travel. But exchange rates are embedded in the price of every imported good: the electronics assembled in China, the oil refined from Saudi crude, the clothing manufactured in Bangladesh, the food shipped from Chile. A 10% depreciation of your domestic currency means every imported item effectively costs 10% more, whether or not the price tag at the store has been updated yet. Exchange rate movements are a tax or a subsidy on your purchasing power, invisible and inescapable.

Part Seven: Currency Pegs and Their Fragility

Successful Pegs

Some currency pegs have survived for decades. The Hong Kong dollar has been pegged at 7.80 per U.S. dollar since October 17, 1983, when it was adopted after the "Black Saturday" crisis (the currency had fallen to 9.60 per dollar in two days amid uncertainty over the 1997 handover to China). Hong Kong maintains the peg through a currency board: banks must deposit U.S. dollars with the Hong Kong Monetary Authority to issue new Hong Kong dollars. The system is backed by reserves exceeding seven times the money in circulation.

The Saudi riyal has been pegged at 3.75 per dollar since 1986, backed by massive oil export revenues in dollars and enormous foreign exchange reserves. The UAE dirham is similarly oil-backed at 3.67 per dollar.

What these successful pegs have in common: enormous reserves relative to the money supply, strong external income (oil or trade surpluses) in the peg currency (dollars), and willingness to sacrifice monetary policy independence to maintain the peg.

Failed Pegs

The failures are more instructive. The ERM (1992), the Thai baht (1997), the Argentine peso (2001, when the 1:1 dollar peg in place since 1991 collapsed and the peso eventually settled at 3:1), and the Swiss franc floor (2015) all followed the same pattern: the peg created confidence, confidence attracted capital, capital masked underlying imbalances, the imbalances grew, and when the peg broke, the accumulated imbalances unwound violently.

The general lesson: a currency peg is a promise. As long as the market believes the promise, the peg holds. The moment the market doubts it, speculators test it. Defending a peg against determined speculators requires either infinite reserves (which no one has) or willingness to raise interest rates to punishing levels (which destroys the domestic economy). Most pegs eventually fail because the political cost of defending them exceeds the political cost of abandoning them.

Conclusion

The forex market is the infrastructure layer of global economic life. Every international transaction passes through it. Its size ($9.6 trillion per day) reflects the scale of global economic interdependence: every barrel of oil, every container ship, every cross-border investment, every foreign worker's remittance involves a currency conversion somewhere.

The forces that determine exchange rates (interest rates, inflation, trade flows, capital movements, institutional credibility) are the same forces that determine the relative economic power of nations. A strong currency is not intrinsically good or bad. It makes imports cheaper but exports more expensive. It attracts capital but hurts exporters. It reflects confidence but can mask imbalances.

What the forex market reveals, more clearly than any other market, is the degree to which national economies are embedded in a global system that no single actor controls. Central banks influence their currencies but cannot dictate them. Governments set policies but cannot control how the market responds. Speculators amplify movements but do not create the underlying forces. The $9.6 trillion that moves every day is the aggregate expression of millions of independent decisions, each one a bet on the relative future of one country versus another. In that sense, the forex market is a continuous, real-time referendum on the quality of every government and every central bank on Earth.