The Foreign Exchange (Forex) market plays a central role in supporting businesses to manage exchange rate risks, optimize costs and enhance competitiveness in the international market in the current context of globalization. With a global transaction volume of 7.5 trillion USD per day, foreign exchange is a strategic tool to help businesses operate effectively in cross-border transactions.
In this article, SEFA Media will provide an overview of foreign exchange, analyze the benefits and risks of foreign exchange in business, and provide a comprehensive view for businesses to build a sustainable financial strategy.
Forex Basics in Business
The foreign exchange market is where currencies are traded through currency pairs such as USD/VND, EUR/USD or JPY/USD, with exchange rates reflecting the relative value of one currency against another. In business, forex is used primarily to facilitate international transactions, such as paying a foreign supplier or receiving payments from an international customer.
With high liquidity, the Forex market allows businesses to convert currencies quickly and efficiently, ensuring smooth transactions. The foreign exchange market operates 24 hours a day, 5 days a week (often referred to as 24/5), from Monday to Friday, thanks to the continuous connection of global financial centers (Sydney, Tokyo, London, New York). This brings maximum flexibility to Vietnamese businesses operating in many different time zones. Understanding this mechanism will help businesses optimize payment activities and manage exchange rate risks effectively.
What challenges does the Forex market face in 2025?
The foreign exchange market in 2025 is forecast to face many fluctuations and risks, influenced by both international and domestic factors, especially the policies of the US Federal Reserve (Fed), trade activities, and foreign direct investment (FDI) flows.
The foreign exchange market in 2025 will be strongly affected by Fed policy (reduced frequency of interest rate cuts, stronger USD), trade challenges (risk of tariffs from the US, trade deficit from China), and a decrease in domestic foreign currency supply due to reduced FDI and net selling trend of foreign investors. The USD/VND exchange rate is expected to continue to fluctuate, with the dong under pressure to depreciate. However, Vietnam’s macroeconomic stability and policy reforms (such as upgrading the stock market) are bright spots to minimize risks and attract foreign capital inflows in the long term. Businesses need methodical exchange rate management strategies to cope with this unstable context.
Some terms to know in Forex
To implement an effective foreign exchange strategy, businesses need to master specialized terminology. These concepts will help businesses understand the market mechanism, thereby making accurate financial decisions:
- Spot Transaction: An immediate currency exchange transaction, typically completed within 2 business days, suitable for instant international payments
- Forward Contract: A contract that locks in a fixed exchange rate for a future currency transaction, helping a business stabilize costs or revenue.
- Hedging: A strategy of using financial instruments such as forwards or options to reduce the risk of exchange rate fluctuations.
- Currency Swap: An agreement to exchange currencies between two parties, often used to manage long-term cash flows in multiple currencies.
- Currency Exposure: The level of exchange rate risk a business faces when transacting with multiple currencies
Benefits and Risks of Forex in Business
Foreign exchange is a strategic tool that helps businesses manage finances effectively in a global trading environment, but it also comes with challenges that require careful preparation.
Benefits of Forex Trading
Forex trading offers a number of strategic benefits that help businesses operate effectively in a volatile global financial environment. Here are the core advantages, from high liquidity to automation, that help businesses leverage the forex market to achieve their business goals.
Leverage financial leverage to optimize capital
Forex trading allows the use of leverage, such as 1:100, to control larger positions than the capital available. This helps businesses optimize the cost of capital in international transactions, increasing profit opportunities when managing exchange rate risk, especially in volatile environments.
Global and diverse currency pairs
The foreign exchange market offers the ability to trade a wide range of currency pairs, from major pairs to regional currency pairs, allowing businesses to participate in international financial movements. This global nature allows for efficient management of multi-currency transactions and supports market expansion strategies.
Short selling is easy and flexible
Forex trading allows short selling of a currency without borrowing, thanks to the trading mechanism in pairs. This provides flexibility in managing exchange rate risk, especially when predicting a currency will decrease in value.
Support effective technical analysis
The foreign exchange market is particularly well suited to technical analysis, which is based on price history, trends, and supply and demand. Businesses can use technical indicators to predict exchange rate movements, making quick decisions without the need for in-depth financial analysis as in the stock or bond markets.
Low transaction costs
The cost of foreign exchange transactions is mainly the spread (the difference between the buy and sell price), which is usually lower than the commission fee in the stock market. Spreads are published transparently in real time, helping businesses control international transaction costs effectively.
Automated trading improves efficiency
Forex trading supports automated strategies, allowing businesses to set entry orders, stop losses, and price limits based on market movements. Automated strategies help take advantage of daily exchange rate fluctuations without constant monitoring, reducing time and effort.
Potential Risks of Forex Trading
Foreign exchange trading poses many challenges, especially in a volatile market environment in 2025, when Fed policy and global trade tensions increase pressure on exchange rates. Businesses need to identify and manage these risks to ensure sustainable business operations.
Unexpected exchange rate fluctuations
The foreign exchange market can experience strong fluctuations due to macroeconomic factors or geopolitical events, leading to losses or capital loss if the trading strategy is not effective. According to Saigon Economic Review, the USD/VND exchange rate increased by nearly 5% in 2024, and this trend may continue in 2025 as the Fed reduces the frequency of interest rate cuts, increasing pressure on businesses that do not use hedging tools.
Lack of oversight in decentralized markets
The forex market operates over-the-counter, with no central exchange, which means regulatory oversight is sometimes limited. This requires businesses to carefully assess the reputation and operations of a broker before opening an account, to avoid risks associated with fraud or lack of transparency.
Limitations on long-term returns
Unlike stocks or bonds, which may yield periodic interest or dividends, forex trading is primarily focused on short-term gains from exchange rate differences. Overnight positions can generate rollover interest or carry trade profits or costs, depending on the interest rates of the currencies in the trading pair. However, the dependence on exchange rate fluctuations means that forex trading lacks a stable long-term return, requiring businesses to have a strict risk management strategy.
SEFA Media – Strategic Partner Leading Successful Forex Trading
In the context of the volatile global financial market in 2025, foreign exchange trading becomes a strategic tool for businesses to manage risks and seize opportunities in international trade. To turn challenges into advantages, businesses need a reliable partner to shape effective financial strategies.
SEFA Media, with a team of experienced experts, is committed to accompanying businesses, providing sophisticated and effective solutions to overcome market fluctuations and optimize global business opportunities. Let SEFA Media become your strategic companion, together creating a sustainable financial future and outstanding success for your business!
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