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Foreign Exchange (FX)

The global market where currencies are traded. Also the rate at which one currency can be exchanged for another.

Full Explanation

The Foreign Exchange (FX or FOREX) market is the decentralized global marketplace where currencies are traded. It determines exchange rates between different currencies. The FX market is the largest financial market globally, with trillions traded daily. Exchange rates fluctuate based on supply and demand, economic indicators, geopolitical events, and interest rates.

Related Terms

Exchange Rate

The price at which one currency can be exchanged for another currency.

Bid-Ask Spread

The difference between the highest price a buyer will pay and the lowest price a seller will accept for a currency.

Frequently Asked Questions

What determines FX rates?

Supply and demand, interest rate differentials, inflation expectations, political stability, and economic growth.

How volatile are FX rates?

Major pairs fluctuate 1-2% daily. Emerging market currencies can be 2-5% volatile daily.

Can I lock in FX rates?

Yes, through forward contracts. You can lock rates for future settlement (up to 12 months).

What are the best FX rates?

Mid-market rates are neutral. Most providers add 0.5-2% margin. Banks typically 1-2%.