<P> The main participants in this market are the larger international banks . Financial centers around the world function as anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends . Since currencies are always traded in pairs, the foreign exchange market does not set a currency's absolute value but rather determines its relative value by setting the market price of one currency if paid for with another . Ex: 1 USD is worth X CAD, or CHF, or JPY, etc . </P> <P> The foreign exchange market works through financial institutions, and operates on several levels . Behind the scenes, banks turn to a smaller number of financial firms known as "dealers", who are involved in large quantities of foreign exchange trading . Most foreign exchange dealers are banks, so this behind - the - scenes market is sometimes called the "interbank market" (although a few insurance companies and other kinds of financial firms are involved). Trades between foreign exchange dealers can be very large, involving hundreds of millions of dollars . Because of the sovereignty issue when involving two currencies, Forex has little (if any) supervisory entity regulating its actions . </P> <P> The foreign exchange market assists international trade and investments by enabling currency conversion . For example, it permits a business in the United States to import goods from European Union member states, especially Eurozone members, and pay Euros, even though its income is in United States dollars . It also supports direct speculation and evaluation relative to the value of currencies and the carry trade speculation, based on the differential interest rate between two currencies . </P> <P> In a typical foreign exchange transaction, a party purchases some quantity of one currency by paying with some quantity of another currency . </P>

What is the principal function of the foreign exchange market
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