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Foreign exchange, Forex, FX. They all mean the same thing — Converting one country’s currency into another, like the US dollar into the Australia dollar.
Foreign exchange (“forex” or “FX”) is when one currency (such as the U.S. dollar) is converted into another country’s currency (such as the euro). Tourists, businesses, and governments all have different needs for foreign exchange, so they go to foreign exchange markets, banks, or the foreign exchange counter at the airport to exchange their home currency for the currency they need. The rate at which one currency is exchanged for another is called the “foreign exchange rate” and is based primarily on the supply and demand for the currencies, which is usually determined by the overall economy and political situation of the two countries involved. The value of one currency is usually assessed in relation to the value of another currency. 1 U.S. dollar = 6.87 Chinese yuan, as of June 23, 2019.
When the United Kingdom voted to leave the European Union in 2016, the value of the British pound fell against the euro or the U.S. dollar because investors interpreted Brexit (short for “British Exit”) as bad for the British economy.
Foreign exchange is the language of money…
Not everyone speaks the same language. Not everyone wants the same money. The foreign exchange market converts from one currency to another, so we can trade things like pickup trucks, avocados, and even a ride on the Ferris wheel across national borders.