What Are The FOREX Rates

What are FOREX Rates?

Also known as Foreign Exchange Rates, FOREX rates are defined as the rate of valuation undertaken by specific monetary systems of individual countries and nations. Foreign Exchange rates are utilized in FOREX Trading operations; banks and investment companies attempt to profit from the fluctuation of these rates through trading and other financial maneuvers. Because FOREX Rates are perpetually subject to experience unexpected – and sometimes unforeseen fluctuation – the prospect of rendering gain or loss exists.

An Example of Fluctuating FOREX Rates

The following example is based on preexisting FOREX Rates that are no longer applicable to current day; this example explores the facilitation of currency exchange with regard to variance and fluctuation of FOREX Rates:
FOREX Rates Timeline (Example #1)

• On February 15th, 2005, an American individual moved to China subsequent the transfer of employment

• On the day of arrival, that individual wished to exchange their respective currency, the United States Dollar (USD) for the currency utilized in China; this currency is known as the Chinese Yuan (CNY)

• The FOREX Rates applicable to the United States Dollar and the Chinese Yuan were as follows; every 1 United States Dollar was equivalent to 8.28 Chinese Yuan – for the sake of argument, we will assume that the FOREX Rate was simply 1 USD = 8 CNY

• The American individual exchanged 100 United States Dollars and received 800 CNY in return; we will also assume that the individual engaged in commercial activity utilizing only the Chinese Yuan

• On February 8th, 2011, the American individual planned on returning to the United States of America; prior to their return, they wished to exchange the remainder of the Chinese Yuan in their possession for United States Dollars, as Chinese Yuan are not accepted in the United States

• FOREX Rates applicable to the USD with regard to the CNY were as follows; every one United States Dollar was equivalent to 6.52 Chinese Yuan – for argument’s sake, we will assume that the FOREX Rate was 1 USD = 6 CNY

• The individual intended on exchanging the 800 CNY with which they had begun their stay in China with hopes of receiving 100 USD in return; however, due to the fluctuation of FOREX Rates, the individual returned to the United States with more than the original 100 USD – because 600 CNY were equivalent to 100 USD, the remaining 200 CNY rendered a profit for that individual

FOREX Rates and Trading

FOREX Rates can be implemented for commercial purposes in addition to instruments reserved for international travel; through the use of FOREX Markets, or Foreign Exchange Markets, trade and exchange activities may be undertaken with the hope of earning gains with regard to increase displayed by certain FOREX Rates in conjunction with foreign currency. Similar to the stock market, which operates on a valuation system that allows for decreased purchase price with regard to stocks decreasing in valuation, FOREX Rates apply to the behavior and trends implicit within the FOREX Market.

NEXT: What Is FOREX Trading