What are FX Rates?
We have covered what is forex and how it works. Here we want to offer an overview of what FX or foreign exchange rate is and what it means to traders and investors. In finance, an exchange rate or forex rate between two currencies is a rate at which one currency will be exchanged for another. In other words, exchange rate is the price or value of one country’s currency in terms of another country’s currency.
History of Currencies
Numismatics is the study of money and many items have been used as commodity money, from animals, to wine, precious metals or other valuable things to humans. Ancient money, for example, became tokens years ago. The Greek word “nomisma” which means coin was used as a currency by the Greeks. From early on, coins were minted in Athens, Corinth, Euboea, Syracuse and other Greek states. Modern money in the form of banknotes appeared as early as the first century BC in Egypt and in Europe later in the fourteenth century AD. By the late nineteenth and early twentieth centuries, due to technological developments and economic growth, the need for a more organised system of payments arose.
The introduction of a monetary unit ($1, €1, £1 etc.) was necessary to provide a common basis, in which to express values, to become a medium of exchange and to represent the currency of the country so that international transactions between countries could be carried out easily and without interruptions. This is what made significant the establishment of an exchange rate regime so that the various currencies and their relative value (exchange rate) could be determined.
The Impossible Trinity
The ideal currency must have 3 characteristics:
Exchange rate stability
The value of the currency must be stable as a result of the stable economic and political situation of the country so that investors and traders feel confident that the currency is not risky.
Convertibility and mobility
There needs to be complete freedom and no obstacles when funds in the specific currency are transferred and exchanged so that countries, investors and traders can minimise their risk and maximise their return.
Convertibility and mobility
Monetary policy is determined by the country’s Central Bank and the bank has the difficult task to maximise the social welfare as well as the value of its financial assets.
Forex trading is one of most lucrative markets and one where investors and traders need to convert currencies when trading in different currency pairs. With the internet, and the demand for fast and efficient conversions of currencies when trading, many currency converters have been developed. Currency converters have been designed to help traders find the correct and accurate forex currency exchange rate easily and hassle-free. Additionally, this is a great tool for businesses sending money overseas regularly so that they can perform their online transactions in an easy and convenient way, while saving time.
A Forex or economic calendar is a real-time calendar of economic events and indicators from all over the world where traders and investors can access multiple events from different countries, time their trades before and after the release of certain economic data and access related news and reports. For any trader who trades Forex through fundamental analysis, looking at the world’s economies and their macroeconomics data (such as GDP, employment, consumption data, inflation, etc.), is paramount to understand what moves the markets of the countries whose currencies they are trading.
Here at Fxprofiles we strive to be the very best we can be, in terms of offering insightful, useful, and entertaining content to our dedicated readers. We have made it our mission to provide existing and prospective traders with a range of materials, to enable them to become better informed traders. It is very important to gain a greater all-round knowledge of the forex market, before opening an account with a broker and trading on the international marketplace.