Foreign Exchange Market - Explained
What is a Foreign Exchange Market?
Written by J. Mance Gordon
Updated at April 23rd, 2024
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What is a Foreign Exchange Market?
We call the market in which people or firms use one currency to purchase another currency the foreign exchange market. Often called FOREX.
In reality, the exchange rate is a price—the price of one currency expressed in terms of units of another currency. The key framework for analyzing prices, whether in this course, any other economics course, in public policy, or business examples, is the operation of supply and demand in markets.
Related Topics
- What Does it Mean to Dollarize
- Foreign Exchange Market
- Who Demands and Supplies Currency in a Foreign Exchange Market?
- Foreign Direct Investment
- Greenfield Investment
- Brownfield Investment
- Portfolio Investment
- Hedging
- Dealers in the Interbank Market
- Weak and Strong Currency
- Depreciation of Currency
- Appreciating and Depreciating Currency
- Exchange Rate
- Real Effective Exchange Rate (REER)
- Limited Flexibility Exchange Rate System
- Expectations about Future Exchange Rates Shift Demand
- Expected rate of return shift demand and supply for a currency
- Relative Inflation Shifts Demand and Supply for a Currency
- Purchasing Power Parity (PPP)
- Relative Purchasing Power Parity
- Law of One Price
- Burgernomics
- Balassa-Samuelson Effect
- Arbitrage
- Tobin Tax
- Foreign Exchange Market
- Foreign Exchange Contract
- Arbitrage
- Hedge
- Why Central Banks Care About Exchange Rates
- How Do Exchange Rates Affect Aggregate Demand and Aggregate Supply?
- What Causes Exchange Rate Fluctuations?
- Exchange Rate Policy
- Fixed Exchange Rate
- Floating Exchange Rate
- Hard and Soft Peg
- What is a Merged Currency?
- Capital Control
- Exchange Stabilization Fund