foreign exchange

noun
Updated on: 26 Jul 2017

Definition of foreign exchange

  1. 1 :  a process of settling accounts or debts between persons residing in different countries

  2. 2 :  foreign currency or current short-term credit instruments payable in such currency

Examples of foreign exchange in a Sentence

  1. Our country has to export more in order to earn more foreign exchange.

First Known Use of foreign exchange

1691


Financial Definition of FOREIGN EXCHANGE

foreign exchange

What It Is

Foreign Exchange (FOREX) refers to the foreign exchange market. It is the over-the-counter market in which the foreign currencies of the world are traded. It is considered the largest and most liquid market in the world.

How It Works

Foreign Exchange has no centralized market. Instead, a foreign exchange market exists wherever the trade of two foreign currencies are taking place. It is open 24 hours a day, five days a week. This foreign exchange market exists to ease investment and trade. The primary trading centers are London, Paris, New York, Tokyo, Zurich, Frankfurt, Sydney, and Singapore. All levels of traders, from central banks to speculators, trade currencies with one another.

Why It Matters

Without this mechanism in place, foreign trade and investment would be impeded. Since many currencies abound along with a few major players like the U.S. dollar, the British pound, and the euro, this apparatus provides a clearinghouse to trade those major currencies.


FOREIGN EXCHANGE Defined for English Language Learners

foreign exchange

noun

Definition of foreign exchange for English Language Learners

  • : the process by which people in different countries pay each other by exchanging different types of money

  • : money from foreign countries


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