What is forex rate?
The forex rate is the relative value between different two currencies. The word ' rate' stands for a certain ratio or proportion, but the forex rate is expressed as per value of each currency against US dollar or Euro. So long as watching television, the news reports forex rate like "one dollar=JPY120.50" or "one Euro=JPY135.85", and the forex rate are displayed by 0.01 point or one basis point and actually traded in this way. For example, take the forex rate of Japanese Yen for US dollar here. If you see that the forex rate drops from 120.50 to 120.00, this represents Yen-appreciation by 50 basis points. Adversely, if the forex rate rises to 121.00, that represents Yen depreciation by 50 basis points. In this way, decreasing forex rate stands for stronger Yen's value while increasing forex rate for weakening Yen's value. We call this action to buy or sell currencies using this forex rate as forex trading.
The variation of forex rates
The variation of forex rates is expressed using currency pairs. There are a lot of combinations of currency pairs as every country has real demand to trade around the world. Let me introduce some major currency pairs in the forex market.
|US Dollar/Japanese Yen||USD/JPY|
|Euro/ US Dollar||EUR/USD|
|British Pound/ US Dollar||GBP/USD|
|US Dollar/ Swiss Francs||USD/CHF|
|US Dollar/ Canadian Dollar||USD/CAD|
|Australian Dollar/ US Dollar||AUD/USD|
|New Zealand Dollar/ US Dollar||NZD/USD|
|Euro/ Japanese Yen||EUR/JPY|
|British Pound/ Japanese Yen||GBP/JPY|
|Swiss Francs/ Japanese Yen||CHF/JPY|
|Australian Dollar/ Japanese Yen||AUD/JPY|
|New Zealand Dollar/ Japanese Yen||NZD/JPY|
|Canadian Dollar/ Japanese Yen||CAD/JPY|
|Euro/ Swiss Francs||EUR/CHF|
|Euro/ British Pound||EUR/GBP|
|Euro/ Australian Dollar||EUR/AUD|
|Euro/ Canadian Dollar||EUR/CAD|
|British Pound/ Swiss Francs||GBP/CHF|
|Australian Dollar/ Canadian Dollar||AUD/CAD|
The rule of price quotation
We often watch the forex rate like 120.30-35 on television. This means that the banks or brokers would buy US Dollar at 120.30 and would sell at 120 35. Then, the investors who need prices have to take at 120.35 if they want to buy, on the other hand, they have to hit at 120.30 if they sell. This forex rate does not mean that other investors can trade at 120.30, 120.31, 120.32, 120.33 120.34 or 120.35 which they like. This practice is call as "Two-way quotation", which made of two different prices. The higher price which you can take is called as the offered rate and the lower price you can hit is as the bid rate. This is somehow confusing you, but you must remember that you can trade forex at the disadvantage price for you to be against.