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Meaning of Foreign Exchange

>> Sunday, September 27, 2009

The term 'foreign exchange' is used in its narrow as well as broad sense. In the narrow sense, foreign exchange simply means the money of a foreign country. For examply, Japanee's 'Yen' is a foreign exchange to a Indian and Indian rupee is a foreign exchange to a Japanee.
In the broader sense, the word 'foreign exchange' is related to the exchange methods and mechanism through which the payments in connection with International trade are made. It covers the methods by which (1) the currency of one country is exchanged for that of another; (2) the forms in which exchanges are conducted and (3) the ratio at which they are effected.

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