MACROONACID.COM

Foreign exchange volatility is one of the key prices formed in financial markets with direct impact on real economy. It not only affects day-to-day business operations of anyone involved in production or trade of goods priced in global markets, but also in long term investment decisions... Since foreign exchange markets are the epitome of efficient markets, understood here simply as market dynamics without trivial strategies of extracting value from random fluctuations, it is always taken for granted that their volatility levels are in some sense fairly evaluated... Nonetheless markets don´t clear by higher mandate, but by ordinary activity of its participants. There must be somewhere players willing to carry market risk in order to provide liquidity for temporal mismatches of demand and supply in an orderly fashion. In most large emerging markets local banks play a key role in the market clearing mechanism.