Foreign Exchange

A A A

DEFINITION

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 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. Forex Market

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

    A put or call option that protects an investor from foreign-exchange risk for ...
  3. Forex - FX

    The market in which currencies are traded. The forex market is the largest, ...
  4. Base Currency

    The first currency quoted in a currency pair on forex. It is also typically ...
  5. Spot Exchange Rate

    The rate of a foreign-exchange contract for immediate delivery. Also known as ...
  6. Authorized Forex Dealer

    Any type of financial institution that has received authorization from a relevant ...
  7. Foreign Exchange Market

    The market in which participants are able to buy, sell, exchange and speculate ...
  8. ICE LIBOR

    See LIBOR
  9. WM/Reuters Benchmark Rates

    Spot and forward foreign exchange rates that are used as standard rates for ...
  10. Heckscher-Ohlin Model

    An economic theory that states that countries export what they can most easily ...
Related Articles
  1. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. Forex: Wading Into The Currency Market
    Forex Education

    Forex: Wading Into The Currency Market

  3. Top 7 Questions About Currency Trading ...
    Forex Education

    Top 7 Questions About Currency Trading ...

  4. The Foreign Exchange Interbank Market ...
    Forex Education

    The Foreign Exchange Interbank Market ...

  5. What Would Have To Happen For The Iraqi ...
    Forex Fundamentals

    What Would Have To Happen For The Iraqi ...

  6. How Countries Deal With Debt
    Credit & Loans

    How Countries Deal With Debt

  7. Is the Iraqi Dinar Investment a Wise ...
    Forex Fundamentals

    Is the Iraqi Dinar Investment a Wise ...

  8. Taking Advantage of Pessimism
    Economics

    Taking Advantage of Pessimism

  9. Where The Equity Opportunities Are
    Economics

    Where The Equity Opportunities Are

  10. Frontier Stocks: 3 Reasons They're A ...
    Economics

    Frontier Stocks: 3 Reasons They're A ...

comments powered by Disqus
Hot Definitions
  1. Amplitude

    The difference in price from the midpoint of a trough to the midpoint of a peak of a security. Amplitude is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
  2. Ascending Triangle

    A bullish chart pattern used in technical analysis that is easily recognizable by the distinct shape created by two trendlines. In an ascending triangle, one trendline is drawn horizontally at a level that has historically prevented the price from heading higher, while the second trendline connects a series of increasing troughs.
  3. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  5. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  6. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
Trading Center