The forward market is generally known as a market where contracts are made to buy or sell currencies for future delivery. But even this overly simplified definition is somewhat confusing and vague to many. Therefore, before starting to describe the purpose and details of the forward market, we will need to be aware that the forward market is a part of the bigger picture – which is, the foreign exchange market. The foreign exchange market is a vast market that allows the purchasing power of one currency to reallocate to another currency.

With the crises of the US economic, the Global economy is also affected. The global economy is in hard condition now. The major currency crises occur with considerable frequencies around the world. In the past, the government-controlled exchange rates caused crises in Mexico, Brazil and Southeast Asia, which have created worldwide attention to speculative attacks. Because these events carry enormous costs, researchers have found new theoretical and empirical work exploring the management of financial crises in emerging markets.

Foreign exchange market is the market who acts as an intermediary that allows people who holds different type of currency around the world to make transactions with each other. Most currency transactions are established through the interbank market, which is the worldwide market where major banks across the world trades with each other. This high volume of international transaction is referred to as the foreign exchange market. The foreign exchange market is dominated by spot and forward market.