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- Financial Dictionary
In foreign exchange terminology, forex, or FX, are shortened forms of the phrase “foreign exchange.” They both refer to transactions whereby the currency of one country is exchanged or traded for the currency of another country. Typically, this trade will be done at a particular rate of exchange and for value “spot” which is delivery of the two currencies in two business days, except for USD/CAD which typically delivers in just one business day.
Forex or FX enables international transactions to occur between participants located in countries that use different currencies internally. For example, a forex transaction might involve one counterparty buying 10 Million U.S. Dollars value spot and selling 90,000,000 Japanese Yen at a rate of 90.00 from another counterparty. Some participants in the forex market, notably corporations, wish to hedge or protect against exchange rate fluctuations, while others, like many hedge funds and forex traders, wish to speculate on them.
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