![]() ![]() The USD in a currency pair with any of the others is known as a major currency pair. dollar (USD), Euro (EUR), Japanese yen (JPY), British pound (GBP), Australian dollar (AUD), Canadian dollar (CAD), and the Swiss franc (CHF). Major Currencies-This refers to a short list of the most traded currencies, which generally stay the same year-to-year. Interbank (bank-to-bank) Rate-This is the wholesale exchange rate that banks use between themselves. The first currency in a currency pair is called the base currency, while the second is called the quote currency. A pip is sometimes called a point.Ĭurrency Pair-A quote of the relative value of one currency unit against another currency unit. For example, 3 pips are the difference between the currency quote of EUR/USD 1.2800/1.2803. Pip-A pip is the smallest unit of value in a bid-ask spread. Some call this profit a fee or commission. As financial middlemen, most will set exchange rates of their own at bid-ask spreads that return a percentage as profit for doing business. Real-world currency exchanges with brokers, banks, or businesses typically do not follow precise market rates. Theoretically, buyers want the smallest possible spreads, while sellers want the highest spreads. The forex is able to facilitate the receipt or payment of units of currency that are equal in value.īid Price-The price that a buyer is willing to pay for a unit of currency.Īsk Price-The price that a seller is willing to accept for a unit of currency.īid-Ask Spread-The difference between the bid and ask price. This market is a necessity because one unit of currency very rarely equals exactly one unit of another currency. Caveat lector.Below is a short list of some of the important terms pertinent to foreign currency exchange.Įxchange Rate-The value of one currency expressed in terms of another.įorex-The foreign exchange market (forex) is a global, decentralized, over-the-counter market for the trading of currencies and is the largest market in the world (followed by the credit market). Exchange rates can vary considerably even within a year and so current rates may differ markedly from those shown here. Some of the data for 2003 refers to rates on May 28 for countries beginning with A-E, and June 2 for countries listed F-Z. Some of the data for the years 1997-2002 refers to the rate on, or close to, January 1 of that year. The data are taken at varying times of the year or maybe the average for the whole year. The exchange rates of advanced economies, such as those of Japan or Hong Kong, against the dollar tend to fluctuate up and down, representing much shorter-term relative economic strengths, rather than move consistently in a particular direction. If the number consistently increases through time, then it is a strong indication that the economy of the country or countries using that currency are in a less robust state than that of the United States (see e.g., the Turkish lira). However, it is useful to look at the variation over time of a particular exchange rate. Then all the numbers in the table would be multiplied by one hundred, but it does not mean all the world's currencies just got weaker. dollar could be rebased tomorrow so that 1 new dollar was worth 100 old dollars. ![]() The magnitude of the numbers in the list does not indicate, by themselves, the strength or weakness of a particular currency. For example, if there are ¥120 to the dollar and €1.2 to the dollar then the number of yen per euro is 120/1.2 = 100. The value of a currency relative to a third currency may be obtained by dividing one U.S. An exchange rate between two currencies fluctuates over time. An exchange rate represents the value of one currency in another. dollar, at present the most widely traded currency in the world. Listed below is a table of historical exchange rates relative to the U.S. ( Learn how and when to remove this template message) Currency rates chart history update#Please help update this article to reflect recent events or newly available information. ![]()
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