Exchange Rates Definition

Exchange rate - is the price of the currency of one country expressed in the currency of another country, with sales transactions. Such a price can be established on the basis of supply and demand for a particular currency in the free market, or to be strictly regulated decision of the government or its main financial body, usually the central bank.

Types of exchange rates
Direct quotation - the number of national currency per unit of foreign.
In most countries, foreign currency exchange rates are expressed in national currency. This is the so-called system of direct quotations. For example, in Germany, the U.S. dollar ($) will be equated to a certain amount of DM (DM), and in New York, one German mark will be equal to a certain number of cents (or dollars if the course grade is quite high).
Reciprocal rate - the number of foreign currency per unit of domestic.

Cross Rates
This relationship between the two currencies, which stems from their course in relation to the rate of the third currency. In operations on the world market are often used cross-rate with the U.S. dollar, as the U.S. dollar is not only a major reserve currency, but the currency of the transaction in most foreign exchange transactions.
DEM / CHF, GBP / DEM
All calculations on cross-rates associated dollar, determined by dividing the
DEM / CHF = USD / CHF: USD / DEM
All calculations on cross rates associated with pound sterling, determined by multiplying the
GBP / DEM = GBP / USD  USD / DEM

Spot rate
Price of the currency of one country expressed in the currency of another country, established at the time of the transaction, subject to exchange currency counterparty banks on the second business day following the date of the transaction. Spot rate reflects how highly regarded the national currency at the time of surgery outside the country.
FOREX (Foreign Exchange) - the international exchange. The abbreviation FX
USD - U.S. Dollar

Currencies (majors)
EUR = ECU - European Currency international-euro (ECU)
USD - (U.S. Dollar)
GBP = STG (sterling)
CHF = SWF (Swiss franc, swissie)
JPY = YEN (JPY)

The finance ministers of the European Union announced currency conversion rates of 11 countries in the new common currency - the euro.
Starting with 0.00 in the European time 1 January 1999 the euro became the official currency of 11 EU countries, although banknotes and coins in circulation will not appear until 2002.
United Kingdom, Sweden, Denmark and Greece did not participate in the conversion.
The ministers announced the following conversion rates:
DEM - 1.95583
French franc - 6.55957
Italian Lira - 1936.21
The Spanish peseta - 166.386
Portuguese escudo - 200.482
Finnish mark - 5.94573
Irish pound - 0.787564
Belgian / Luxembourg franc - 40.3399
Dutch guilder - 2.20371
Austrian schilling - 13.7603


USD / CHF = 1,7050 / 60
This means that a trader can buy dollars for Swiss francs at the exchange rate of 1.7060, while the dollar sold for Swiss francs at the exchange rate of 1.7050.
1.7050 - bid (bid); 1,7060 - the ask (ask).
Point (point) - this is the minimum price change (pips) - 1,7055 - 5 pips.
Spread (spread) - the difference between the purchase price and the selling price: 1.7060 - 1.7050 = 10 pts points (standard bank spread from 5 to 10 pts).
1,7060 - 1,70 - big figure (big figure).
Hedge (fence) - insurance against currency risks.