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How can I invest in a foreign exchange market? 4 trillion average traded value each day. These are futures contracts on currencies, which are bought and sold based on a standard size and settlement date. Where futures contracts represent an obligation to either buy or sell a currency at a future date, foreign currency options give the option holder the right – but not the obligation – to buy or sell a fixed amount of a foreign currency at a specified price on or before a specified date in the future.
A number of foreign currency exchange-traded products that provide exposure to foreign exchange markets are available. Some ETFs are single-currency, while others buy and manage a group of currencies. Foreign currency CDs are available on individual currencies or baskets of currencies and allow investors to earn interest at foreign rates. These are mutual funds that invest in the bonds of foreign governments. Foreign bonds are typically denominated in the currency of the country of sale. If the value of the foreign currency rises relative to the investor’s local currency, the earned interest will increase when it is converted. Like all investments, investing in the foreign exchange market involves risk.