What are the functions of a foreign exchange market?
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- Transfer Function: Transfer function refers to transferring of purchasing power among countries.
- Credit Function: It implies provision of credit in terms of foreign exchange for the export and import of goods and services across different countries of the world.
- Hedging Function: Hedging function pertains to protecting against foreign exchange risks. Where Hedging is an activity which is designed to minimize the risk of loss.
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- Lending to the rest of the world.
- A gift from foreigners.