Foreign exchange market is that market which deals with means and methods by which rights to income and wealth in our country's currency are converted into similar rights in terms of another country's currency. It is through instruments such as cheques, drafts, Bills of exchange, Bankers bill or promissory notes, the foreign currency accounts of bank that the banks are able to effect, such exchange claims to currencies. No currency is physically exchanged as it is a legal tender in any country other than in the issuing one. Therefore, exchange is to take place through book entries and credit instruments by bank. One of the important components of international financial system is the foreign currency exchange markets. The various commercial and financial transactions as between countries results in receipts and payments as between them. The essential difference between domestic and international trade is currency.