Foreign Exchange

Exchange Rates Currency band Exchange rate Exchange rate regime Fixed exchange rate Floating exchange rate Linked exchange rate In finance, the exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other. ... Image File history File links Forex. ... The currency band is a system of exchange rates by which a floating currency is backed by hard money. ... A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. ... A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currencys value is allowed to fluctuate according to the foreign exchange market. ... A linked exchange rate system is a type of exchange rate regime to link the exchange rate of a currency to another. ...

Markets Foreign exchange market Futures exchange The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ... The introduction to this article provides insufficient context for those unfamiliar with the subject matter. ...

Products Currency Currency future Forex swap Currency swap Foreign exchange option A currency future, also FX future or foreign exchange future, is a futures contract to exchange one currency for another at a specified date in the future at a price (exchange rate) that is fixed on the last trading date. ... Forex swap is an over the counter short term interest rate derivative instrument. ... A currency swap is a foreign exchange agreement between two parties to exchange a given amount of one currency for another and, after a specified period of time, to give back the original amounts swapped. ... In finance, a foreign exchange option (commonly shortened to just FX option) is a derivative where the owner has the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date. ...

See also Bureau de Change A Bureau de Change is an organisation or facility which allows customers to exchange one currency for another. ...

The exchange rate regime is the way a country manages its currency in respect to foreign currencies and the foreign exchange market. It is closely related to monetary policy and the two are generally dependent on many of the same factors. The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. ... Monetary policy is the process by which the government, central bank, or monetary authority manages the money supply to achieve specific goals—such as constraining inflation or deflation, maintaining an exchange rate, achieving full employment or economic growth. ...

The basic types are a floating exchange rate, where the market dictates the movements of the exchange rate, a pegged float, where the central bank keeps the rate from deviating too far from a target band or value, and the pegged exchange rate, which ties the currency to another currency, mostly more widespread currencies such as the U.S. dollar or the euro. The United States dollar is the official currency of the United States. ... ISO 4217 Code EUR User(s) Andorra, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Kosovo, Luxembourg, Monaco, Montenegro, the Netherlands, Portugal, San Marino, Slovenia, Spain, Vatican City Inflation 1. ...

[edit] Float

See main article: floating exchange rate A floating exchange rate or a flexible exchange rate is a type of exchange rate regime wherein a currencys value is allowed to fluctuate according to the foreign exchange market. ...

Floating rates are the most common exchange rate regime today. For example, the Dollar, Euro, Yen, and British Pound all float. However, since central banks frequently intervene to avoid excessive appreciation/depreciation, these regimes are often called managed float. Japanese 10 yen coin (obverse) showing Phoenix Hall of Byodoin Yen is the currency used in Japan. ... For details of notes and coins, see British coinage and British banknotes. ...

[edit] Pegged float

Here, the currency is pegged to some band or value, either fixed or periodically adjusted. Pegged floats are:

• Crawling bands: the rate is allowed to fluctuate in a band around a central value, which is adjusted periodically. This is done at a preannounced rate or in a controlled way following economic indicators.
• Crawling pegs: Here, the rate itself is fixed, and adjusted as above.
• Pegged with horizontal bands: The currency is allowed to fluctuate in a fixed band (bigger than 1%) around a central rate.

An economic indicator (or business indicator) is a statistic about the economy. ...

[edit] Fixed

See main article: fixed exchange rate A fixed exchange rate, sometimes (less commonly) called a pegged exchange rate, is a type of exchange rate regime wherein a currencys value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold. ...

Fixed rates are those that have direct convertibility towards another currency. In case of a separate currency, also known as a currency board arrangement, the domestic currency is backed one to one by foreign reserves. A pegged currency with very small bands (< 1%) and countries that have adopted another country's currency and abandoned its own also fall under this category. // A currency board is a monetary authority which is required to maintain an exchange rate with a foreign currency. ... Foreign exchange reserves are the foreign currency deposits held by national banks of different nations. ...

[edit] Literature

• Tiwari, Rajnish (2003): Post-Crisis Exchange Rate Regimes in Southeast Asia, Seminar Paper, University of Hamburg. (PDF)