How do Banks make Money on Foreign Exchange?

how do banks make money on exchangerates
banks are the largest dealers of foreign
exchange globally
but how do they profit from transacting
in foreign exchange
simply by buying at a low price from one
customer

and selling at a high price to another
customer this is called
the bid ask spread exchange rates are
quoted in bid ask terms
for example let us say the u.s
dollar-type bot exchange rate is 31.3
if a person wants to buy thai bot in
exchange for the u.s dollars that she
has
the bank will sell the taipata to her at
say 31 thai bot per us dollar
so she pays one us dollar to the bank
and gets 31 thai bot
on the other hand let us say another
customer of the bank
want to sell his thai bot and buy one us
dollar
the bank will pay him the one us dollar
that it received from the earliest
transaction
but charged him 31.6 tybott
in summary the bank paid 31 thai bot
and collected 31.6 tai bot making a cool
profit of 0.6 tai bot in the process
in this case 31 is the bid price it is
the price at which the bank dealer is
willing to bid for the product the
customer is selling
in this case us dollars 31.6 is the ask
price
it is the price that the bank dealer is
asking from the customer for the product
that he is purchasing
in this case us dollars and finally
31.3 is the actual exchange rate
often called the midpoint exchange rate
the foreign exchange market
always quotes currencies in pairs for
exampleaud to usd usd to sgd
or eur to usd let us take the usd to d
 as an example the currency quoted
first
is called the base currency think of
this as a product
like an ice cream the currency quoted
second is called the quote currency
think of this as the price of the ice
cream so
when the markets quote usd to sgd to be
1.35
it means that the price of one us dollar
is 1.35
singapore dollars in other words
it will cost you 1.35 singapore dollars
to buy one usd
or conversely you will get 1.35
singapore dollars
for one u.s dollar that you sell the
foreign exchange market is the largest
in size in the world
and trades continuously 24 7. it is said
that globally
approximately two trillion dollars of
spot foreign exchange
gets traded daily that's why foreign
exchange is a very lucrative business
for banks