The currency used as the basis for an exchange rate, where foreign currency rates are quoted per single unit of the base currency, commonly US dollars.
The Closing-Rate Method, also known as the Net-Investment Method, involves restating balance sheet figures into another currency using the closing rate of exchange for all assets and liabilities as of the balance-sheet date.
A currency for which there are no barriers or restrictions in the foreign exchange market, allowing it to be freely exchanged for other currencies.
Currency refers to various forms of money that are in circulation within an economy, serving as a medium of exchange for goods and services.
A currency swap involves the exchange of principal and interest in one currency for the same in another currency, often to reduce exposure to foreign exchange risk and interest rate risk.
Eurobanking refers to the acceptance of deposits and the extension of loans denominated in currencies other than the currency of the country where the bank is located.
A gain or loss resulting from an exchange-rate fluctuation arising from the conversion of other currencies into the domestic currency.
An exchange rate is the rate at which one currency can be converted into another. It indicates the relative value of two currencies and is a critical factor in international trade and finance. The UK uniquely expresses exchange rates as the number of units of a foreign currency that £1 sterling will buy.
A dirty float, also known as a managed float, is a system of exchange rate management where a currency's value is primarily determined by market forces but is subject to occasional intervention by a country's central bank in order to stabilize or steer the currency's value.
The floating currency exchange rate, also known as a flexible exchange rate, is the movement of a foreign currency exchange rate in response to changes in market forces of supply and demand. The value of a country's currency is determined by market conditions rather than by any direct intervention by the central or national government.
An in-depth look at the foreign exchange market, commonly known as FOREX or FX, where currencies are traded.
A highly liquid global marketplace for currency trading. The foreign exchange market includes both the spot market for immediate transactions and the forward market for future transactions.
A foreign-exchange dealer is an individual or entity engaged in the buying and selling of foreign currency, often working at a commercial bank or financial institution. Their role includes executing currency trades on behalf of clients, managing foreign exchange risks, and sometimes speculating on future currency movements.
The forward differential, often linked to forward points, is a crucial concept in foreign exchange (FX) markets, influencing currency forward contracts pricing.
FX, or Foreign Exchange, refers to the global market where currencies are traded. It is one of the most liquid and largest financial markets in the world, encompassing all aspects of trading, buying, selling, and exchanging currencies at current or determined prices.
The interbank market is a global network of financial institutions engaged in lending and borrowing activities, primarily focused on short-term loans and foreign exchange transactions.
Key currencies are the major currencies in the global economy, frequently used in international trade and finance.
A managed currency is a type of currency whose international value and exchangeability are heavily regulated by its issuing country. It often involves strategic interventions by the country's central bank to stabilize or control the currency's value in the international market.
Market price refers to the prevailing price of a product, service, security, or raw material in an open and competitive market. This term is crucial in formal markets such as stock exchanges or commodity markets.
An offshore exchange rate is the market price of a regulated currency outside the legal jurisdiction of the regulating government. It operates similarly to a legal black market rate.
A parallel hedge involves mitigating exposure to fluctuations in one foreign currency by using a second currency expected to move similarly.
International reserves are holdings of foreign currencies and other assets that central banks use to manage currency values and balance payments between countries.
Settlement day refers to the date on which trades are officially cleared through the delivery of the securities or foreign exchange, finalizing the transaction.
A market that deals in commodities or foreign exchange for immediate delivery. Immediate delivery in foreign currencies usually means within two business days. For commodities, it typically means within seven days.
The spot rate is the current market price at which a particular currency can be bought or sold for immediate delivery, typically within two business days.
Telegraphic Transfers (TT) are methods of transmitting money overseas by means of electronic transfer between banks. The transfer is usually made in the currency of the payee and may be credited to their account at a specified bank or paid in cash to the payee upon application and identification.
The City of London, often referred to simply as 'the City,' represents London’s financial district where many prominent banks, financial markets, and exchanges are headquartered. It remains an influential international merchanting center situated in a one-square-mile area known as the Square Mile.
The trading desk at the New York Federal Reserve Bank is the operational arm of the Federal Open Market Committee (FOMC), responsible for executing all transactions undertaken by the Federal Reserve System in the money market and government securities market. It also serves as the Treasury Department's monitor and handles foreign exchange market transactions.
Translation risk, also known as currency risk, is the monetary value risk that occurs in international trade when two or more currencies are used in a transaction. The longer the period before the transaction ends, the greater the translation risk.
