Foreign Exchange

AAA

DEFINITION of 'Foreign Exchange'

The exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."

INVESTOPEDIA EXPLAINS 'Foreign Exchange'

Foreign exchange transactions encompass everything from the conversion of currencies by a traveler at an airport kiosk to billion-dollar payments made by corporate giants and governments for goods and services purchased overseas. Increasing globalization has led to a massive increase in the number of foreign exchange transactions in recent decades. The global foreign exchange market is by far the largest financial market, with average daily volumes in the trillions of dollars.

RELATED TERMS
  1. Foreign Exchange Market

    The market in which participants are able to buy, sell, exchange ...
  2. Equity Linked Foreign Exchange ...

    A put or call option that protects an investor from foreign-exchange ...
  3. Authorized Forex Dealer

    Any type of financial institution that has received authorization ...
  4. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. ...
  5. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
  6. Forex - FX

    The market in which currencies are traded. The forex market is ...
RELATED FAQS
  1. How does inflation affect the exchange rate between two nations?

    Understand how inflation can affect foreign exchange rates of a currency and how it is just one of many economic factors ...
  2. What skills should I acquire to take advantage of arbitrage trading?

    Understand what arbitrage trading involves and what the necessary skill set is that a trader must develop in order to master ...
  3. How do I find out my bank's bid-ask spread for currency conversions?

    Learn how to find your bank's bid-ask spreads for currency conversions, and understand why you should consider alternative ...
Related Articles
  1. Forex Education

    Currency Exchange: Floating Rate Vs. Fixed Rate

    Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
  2. Forex Education

    Forex: Wading Into The Currency Market

    We go over the ground rules and available resources needed for this undertaking.
  3. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  4. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  5. Investing News

    Sun Pharma And Ranbaxy: An Ideal Pharma Marriage?

    The Sun Pharma merger with Ranbaxy will blend the complementary market strengths and areas of expertise of each company and create a powerful pharma force.
  6. Economics

    Growth and Stabilization In The Global Economy

    The continued advance for stocks implies a stabilization in international economies, which indicates global growth is steadying after declining last year.
  7. Investing

    Hedged ETFs That Help You Cushion Currency Impact

    If you’re an investor holding non-U.S. assets, the returns on your investments will be affected when you translate your investment from its local currency
  8. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  9. Investing

    The Impact Of A Stronger Dollar In The Markets

    The economy continues to improve, but also demonstrated that some areas of the stock market are more vulnerable to an increase in interest rates.
  10. Economics

    This Is A Small Country With Huge Potential to Grow

    Trinidad and Tobago's increased revenue and economic success have been primarily generated by its energy sector, but it still might be best to diversify.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center