Definition of Foreign exchange 1. Foreign exchange refers to the simultaneous purchase and sale of a currency in the over-the-counter market.
2. Currency refers to a unit of transaction issued by a national government or central bank. The value of currency is used as the unit of measurement for transactions.
3. Benchmark currency refers to the first currency in a currency pair and the currency that is fixed in determining the price of a currency pair.
The U.S. dollar (USD) and (EUR) are the main benchmark currencies in terms of daily trading volume.
(GBP), also known as Sterling, is the third benchmark currency.
Currency pairs based on the US dollar include USD/CHF, USD/CHF and;
Currency pairs based on the euro include, EUR/JPY, EUR/GBP and EUR/CHF.
Sterling, which is the benchmark currency against the pound/yen.
Australian Dollar (AUD), is the benchmark currency of the (AUD /USD) currency pair.
How does the foreign exchange market work?
Unlike most financial markets, the foreign exchange market has no specific trading venue.
The entire foreign exchange market operates on the basis of an electronic network between banks, institutions and individuals.
Depending on the time difference, each day starts in Sydney and then shifts to Tokyo, London and New York.
How is it affected?
Foreign exchange markets and prices are mainly influenced by international transactions and investment flows.
To some extent, foreign exchange prices are also influenced by national economies and policies, such as interest rate adjustments, inflation, and political instability (which heavily influence stock and bond markets).
