Foreign currency exchange has undergone a huge transformation owing to technological advancements. Data analytics and useful insights on foreign currency have helped traders to trade cost-effectively and efficiently. New technologies like AI and Machine Learning have had a significant impact on foreign currency exchange by improving risk management.
Foreign Currency Exchange – What is it?
Foreign Currency Exchange is also known as Forex or FX and refers to the conversion of one currency into the other at a specified rate. This rate for every currency floating as it is determined by the demand and supply in the market.
87 % of the total daily value traded is in the US dollar although there are other highly-traded international currencies such as Euro, Japanese Yen, Australian Dollar and British Pound.
Technological Advancements in the Foreign Currency Exchange Field
Technology has played a significant role in the foreign currency exchange field. From online trading platforms to trading apps to automated trading system stems such as forex robots, technological advancements have made the foreign currency exchange market more accessible and efficient. Money exchange has been given a digital character with the advancements in technology while making it more convenient for traders to trade.
Advanced Trading tools have provided traders with crucial insights that have made foreign currency exchange even more efficient. There are international currency converter sites and apps that convert currencies in a jiffy and help traders trade with more ease.
Also, traders have been able to get support in risk management and training owing to technological advancements. Technology is ever-evolving and the foreign currency exchange field is all set to reap more benefits out of the same.
Social Media has also played a crucial role in connecting traders from different parts of the world. Communication between traders has become seamless because of social media platforms. Traders and brokers can use the platforms for networking and sharing experiences and trading habits.
Technology’s Impact or Influence on Foreign Currency Exchange
- Increased Competition – Technological advancements in the foreign exchange market have made competition between traders more intense as there are many trading platforms for traders to trade. These platforms not only house amateur traders but also experienced ones thus having an impact on the currency of exchange and the foreign exchange rate.
- Enhanced Efficiency – Technological advancements like AI and Machine Learning tools have made forecasting future market trends and examining historical data easy thus, making trading techniques in the foreign currency exchange field more efficient.
- Improved Risk Management – Technological advancements have also made risk forecasting possible that in turn leads to improved decision-making this helping traders maximize profits.
- Automation and Removal of Repetitive Tasks – Data processing and risk management have become automated these days owing to technological advancements removing the need to perform repetitive tasks manually all the while saving more time. In addition to this, the importance of digitalcash is increasing which is in turn reducing the need for cash deposits, owing to the invent of banking apps such as Venmo.
- Improved market transparency – The foreign currency exchange market has become more transparent for traders because of technological advancements.
Challenges posed by Technology In The Foreign Currency Exchange Market
- Threats To Cybersecurity – The technological advancements have a flip slide too and that relates to the increase in incidents of data hacking around the world as far as the foreign currency exchange market is concerned.
- Over-dependence on Automation – Over-dependence on automation is posing as a threat to the jobs of many employees as automation becomes increasingly used in the foreign currency exchange market.
- Regulatory Concerns – AI has the potential to violate copy rights and data privacy which is a major concern in the foreign currency exchange market these days.
Future Technological Trends in the foreign exchange currency market
- Block chain Domination – Blockchain‘s popularity is continuing to grow and it is possible that block chain will dominate the foreign currency exchange landscape too in near future and why not? It is safe to use and enhances transparency. However, the fact that block chain needs information sharing among a network of computers indicates there is an increasing need to come into a consensus for the same by taking appropriate permissions.
- Continued Importance of AI and Machine Learning – AI and Machine Learning are here to stay because of the benefits that have been shared above. In future too, its going to dominate the foreign currency exchange market.
- Big Data Usage – Big data can help in better retention of traders by brokers in the foreign currency exchange market and thus will be used extensively in future.
Technology has had a significant influence on the foreign currency exchange market. The advent of technologies like AI, Machine Learning, and Blockchain have changed the way the market operates. They have made trading more accessible and efficient.
However, recent cyber-attacks in the foreign currency exchange market have led to the increasing emphasis on the responsible usage of technology in the foreign currency exchange market. For example, Machine Learning and Statistical Learning Techniques can be put to use to identify hidden fraudulent behavioural patterns. These techniques can eliminate fraudulent behaviours and forms such as manipulation of capital markets in addition to detecting fraudulent behavioural patterns.
Regulatory and Supervisory Frameworks should be in place to mitigate the risks of financial fraud. Only then can we reap the benefits of technology in the foreign currency exchange market in a proper way.