Foreign exchange definition

Foreign exchange market - Wikipedia

 

foreign exchange definition

foreign exchange noun the system by which one currency is converted into another, enabling international transactions to take place without the physical transportation of gold. Kids Definition of currency 1: common use or acceptance The idea has wide currency. 2: money in circulation We were paid in the country's currency. Jun 25,  · Foreign Exchange (forex or FX) is the trading of one nation's currency for another. The forex market is the largest, most liquid market in the world, with trillions of dollars changing hands .


Currency | Definition of Currency by Merriam-Webster


By Nick K. Lioudis Updated Jun 22, Foreign exchangeor forexis the conversion of one country's currency into another, foreign exchange definition. In a free economy, a country's currency is valued according to the laws of supply and demand.

In other words, foreign exchange definition, a currency's value can be pegged to another country's currency, such as the U. A country's currency value may also be set by the country's government. However, foreign exchange definition countries float their currencies freely against those of other countries, foreign exchange definition keeps them in constant fluctuation.

Factors Affecting Currency Value The value of any particular currency is determined by market forces based on tradeinvestment, tourism, and geo-political risk. Every time a tourist foreign exchange definition a country, for example, they must pay for goods and services using the currency of the host country. Therefore, foreign exchange definition tourist must exchange the currency of his or her home country for the local currency.

Currency exchange of this kind is one of the demand factors for a particular currency. Key Takeaways Foreign exchange, also known as forex, is the conversion of one country's currency into another. The value of any particular currency is determined by market forces related to trade, foreign exchange definition, investment, tourism, and geo-political risk.

Foreign exchange is handled globally between banks and all transactions fall under the auspice of the Bank for International Settlements BIS. Another important factor of demand occurs when a foreign company seeks to do business with another in a specific country. Usually, the foreign company will have to pay in the local company's currency. At other times, it may be desirable for an investor from one country to invest in another, and that investment would have to be made in the local currency as well.

All of these requirements produce a need for foreign exchange and contribute to the vast size of foreign exchange markets. How Inflation Affects Foreign Exchange Rates Inflation can have a major effect on the value of a country's currency and its foreign exchange rates with other currencies.

A very low rate of inflation does not guarantee a favorable exchange rate, but an extremely high inflation rate is very likely to have a negative impact. The interrelationship between interest rates and inflation is complex and often difficult for currency-issuing countries to manage. If consumer spending increases and demand grows to exceed supply, inflation may ensue, which is not necessarily a bad outcome.

However, low interest rates don't usually attract foreign investment the way higher interest rates can. Compare Investment Accounts.

 

Foreign exchange - definition of foreign exchange by The Free Dictionary

 

foreign exchange definition

 

Definition of foreign exchange. 1: a process of settling accounts or debts between persons residing in different countries. 2: foreign currency or current short-term credit instruments payable in such currency. See foreign exchange defined for English-language learners. foreign exchange noun the system by which one currency is converted into another, enabling international transactions to take place without the physical transportation of gold. Foreign exchange trading is a contract between two parties. There are three types of trades. The spot market is for the currency price at the time of the trade. The forward market is an agreement to exchange currencies at an agreed-upon price on a future date.