Appreciation - When a currency strengthens due to market demand.
Ask - The price at which the currency is offered.
Back Office - The term for the part of the organisation that deals with
settlement and processesing of completed trades.
BACS: Bankers Automated Clearing Services -an electronic transfer system
Sterling clearing for domestic banks. Usually takes 2 working days for the
Balance of Payments - The record of the economic transactions of a country
during a given period. EG The outgoing against the incoming foreign
Bank Rate - The interest rate at which a countries central bank lends
to its domestic banking system.
Bear - A 'Bear' is an investor who believes that prices in a market are
going to fall. Hence also 'Bear Market'
Bid - Bid is the price at which a buyer has offered to purchase the
Broker - A Broker is a person whom brings buyers and sellers together in a
market. Brokers do not take market positions.
Bull - An investor who believes that market prices are going to rise .Also
Buying Rate -See also Bid Price The Buying or Buy rate is the rate at
you can buy in the market place, determined by the buyer and seller.
Cable - A long established nickname for the US Dollar/British Pound rate
the foreign exchange market. Derived from the telephone 'cable' that ran
under the Atlantic
CHAPS: Clearing House Automated Payment System - a same day electronic
transfer system used by UK clearing Banks
Contract - In the context of foreign exchange a contract is an agreement
buy or sell a specified amount of a particular currency.
Conversion - The actual process by which a sum denominated in one
currency is exchanged for a sum denominated in another
Convertible currency - A currency that can be exchanged without
restriction for another
currency from the central bank.
Cross rates - The Rate between two currencies, for example GBP/EURO
Deal date - The date on which a transaction is agreed upon.
Delivery date - Also known as the value date, it is the date of maturity
of the contract and when the exchange of
the currencies is made.
EFT - Electronic Fund Transfer. The transfer of funds between banks. Also
known as a wire transfer.
Foreign Exchange - The purchase or sale of a currency against the sale or
purchase of another currency.
Forex - A nickname to describe the foreign exchange market.
Forward Rate - A Forward rate is based on the interest rate differentials.
It is a type of contract that allows you to fix an exchange rate today for a
date in the future.
Fundamentals - There are many factors that affect currency exchange
rates. Macro economic factors play a large part and these are known as
Fundamentals and include inflation, government deficit,trade balance,growth
and interest rates.
FX - Foreign Exchange.
Gross Domestic Product - The total value of a country's output, income or
expenditure.The GDP is a measure of its economic activity.
Gross National Product - Gross domestic product plus income earned from
investment or work abroad.
Hedge - Hedging is to protect oneself from currency fluctuautions.
Indicative quote - An exchange rate quote which is not firm.
Inter-bank rates - The bid and offer exchange rates at which international
place buy and sell currency with each other. These prices are the basis of
the market exchange rates.
Limit order - A written order to request the purchase or sale of currency
at apre-determined exchange rate.
Offer - The offer price is the price at which a seller is willing to sell
an amount of currency.
Pip - A pip is one unit of price on the exchange rate.For most currencies,
it denotes the fourth decimal place in an exchange rate and
represents 1/100 of one percent (.01%).
Position - A position is a measure of a commitment in a given currency. A
be either flat, long, (more currency bought than sold), or short ( more
currency sold than bought).
Profit Taking - When a position is held in a currency it is sometimes
liquidated to realise a profit.
Quote - A quote is an indicative price for a currency.
Range - Range is the difference between the highest and lowest price of a
currency during a given trading period, normally a day.
Same day transaction - A transaction that matures on the day the
transaction takes place.
Selling rate - The exchange rate at which a bank is willing to sell
Settlement date - The date which foreign exchange contracts settle.
Spot rate - An foreign exchange transaction that requires settlement
within two business days. Spot rate is the most common rate.
Spread -The Spread is the difference between the bid and ask price of a
Stop-Loss order - A written order to buy or sell currency at the best
available price when an agreed
price has been reached.
Transaction date - The date on which a foreign exchange trade happens.
Value Date - For a spot transaction it is two business banking days
Working day - A day on which the banks are open for business. For FX
transactions, a working day only
occurs if the bank in both financial centre's are open for business