Foreignexchangetradingreferstotradingonecountry’smoneyforthatof
another country.Theneedforsuchtradearisesbecauseoftourism,the
buyingandsellingofgoodsinternationally,orinvestmentoccurringacross
internationalboundaries.Thekindofmoneyspecificallytradedtakesthe
formofbankdepositsorbanktransfersofdepositsdenominatedinforeign
currency.The foreign exchangemarket, asweusuallythinkofit,refersto
large commercialbanksinfinancialcenters,suchasNewYorkorLondon,
that tradeforeign-currency-denominateddepositswitheachother.Actual
bank notes likedollarbillsarerelativelyunimportantinsofarastheyrarely
physicallycrossinternationalborders.Ingeneral,onlytourismorillegal
activitieswouldleadtotheinternationalmovementofbanknotes.