Foreign Exchange Rates Involve Trading of Two Currencies

Interdependence can be referred to as the key for survival since the past as every element in nature is dependent on one another. However, talking about the present time also the same applies. People reside across the globe having different cultures, language, clothing, life style, food habits, currencies, etc. While talking about interdependence culture, lifestyle, language, etc need to be taken into consideration but when it comes to currencies it cannot be ignored in any manner. A country whether it is a developing country or a developed one, it has to rely on foreign exchange and so on the foreign exchange rates.

People need to exchange currencies for one or the other reason. Suppose a person from India is flying to US then he certainly needs to have dollars in his pocket. There are various ways to do so. He may buy foreign currency by cash, traveler’s cheque or traveler’s card. The value of a country's currency keeps on changing and so do the international exchange rates. Currency exchange rates may vary on a daily basis. Now foreign exchange rate is the rate at which one currency is exchanged for the other. Foreign exchange market determines the exchange rate. Foreign exchange rates are also called forex rates or fx rates. They are basically two foreign exchange rates. One is Spot exchange rate and the other is Forward exchange rate. Spot exchange rate is the current exchange rate whereas forward exchange rate is quoted and traded today but for delivery and payment on a specific future date.

When it comes to retail exchange market again there are two rates. One is buying rate and the other is selling rate. Both the rates are quoted by money dealers. These rates quoted by them include their profit too. Buying rate refers to the rate at which  the dealer will buy the currency whereas selling rate refers to the rate at which he will sell the currency.