What is currency?
Most commonly, the word currency can refer to any form of money used in circulation throughout the public. Today, most currencies usually contain both coins (hard money) and paper (soft money). It is generally issued and maintained by a governing authority and is known as 'fiat' money.
What is foreign currency?
The currency of any foreign country is an authorized medium of circulation and the basis for record-keeping in that country. Foreign currency is traded by banks either by the actual handling of currency or checks or by establishing balances in foreign currency with banks in those countries.
What is foreign exchange?
Foreign Exchange (forex or FX) is the trading of one currency for another. For example, one can swap the U.S. dollar for the euro. Foreign exchange transactions can take place on the foreign exchange market, also known as the Forex Market.
Why is foreign exchange important?
Foreign exchange is important for one major reason: it determines the value of foreign investment. A volatile exchange rate discourages foreign investment, as does a high, stable one. A low, stable exchange rate, however, encourages foreign investment, but at the price of the low-valued currency's economy.
