IntroductionThe foreign exchange market is a global decentralized over-the-counter financial market for trading currencies. Determines the relative values ​​of different currencies. A local currency is a currency that is not backed by a national government and intended to be traded only in a small area. Currency is used as a medium of exchange for goods and services. It plays a vital role in the economy. Because the devaluation of a local currency makes its goods relatively cheaper; export capacity increases. As demand for the local country's goods and services decreases, its local currency devalues, and the opposite occurs if the volume of exports increases. Exchange rate is one of the important factors affecting the balance of payments of a country. A balance of payments (BOP) sheet is an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, and financial capital, as well as financial transfers. A nation's sources of financing, such as exports or receipt of loans and investments, are recorded as positive or surplus items. Uses of funds, for example for imports or investments in foreign countries, are recorded as a negative or deficit item. Foreign exchange represents the methods and tools used to settle debt payments between two nations that use different currency systems. A nation's balance of payments has a major effect on the exchange rate of its currency. Telegraphic bills, drafts, checks and money orders are the main means of payment in international transactions. Buying or selling foreign currency to profit from sudden changes in the exchange rate...... middle of paper ......, W. and Unni, S. (2005), ''Exchange rate exposure among European firms: evidence from France, Germany and the United Kingdom”, Accounting and Finance, vol. 45, pp. 479-97Salifu, Z., Osei, K.A. and Adjasi, C.K.D. (2007), "Foreign Exchange Risk Exposure of Listed Companies in Ghana", The Journal of Risk Finance, Vol. 8, no. 4, pp. 380 393Siddiqui AM (2009). “Modeling Volatility of Pak Rupee Against Five Major Currencies in the Perspective of Different Exchange Rate Regimes”, European Journal of Economics, Finance and Administrative Sciences, Vol. 17, pp. 1-16Williamson, R. (2001). “Exchange Rate Exposure and Competition: Evidence from the Automobile Industry,” Journal of Financial Economics, Vol. 59, pp. 441-75 Wilson, A. and Heitger, D. (2002), “Hedge accounting: foreign currency exposure”, Financial Instruments Special, Vol. 10, no. 1, pp. 33-37