CURRENCY GLOSSARY

Living France - - The Essentials -

Base currency: The base currency is the first currency listed in a currency pair.

Currency pair: A currency pair is the two cur­ren­cies that make up an ex­change rate – the base currency fol­lowed by the quote currency.

Currency trans­fer: Sim­ply us­ing one currency to buy an­other currency – trans­fer­ring one for the other.

De­posit: To store money, whether de­posit­ing your own money in a bank for fur­ther use, or pay­ing a frac­tion of a to­tal sum as a down pay­ment for a con­tract. This can in­clude de­posits on a for­ward con­tract.

Ex­change rate: The rel­a­tive value of two cur­ren­cies. For ex­am­ple, if the of­fered pound to euro (GBP/EUR) ex­change rate is 1.15, this means you would get 1.15 eu­ros for each pound.

Forex: An ab­bre­vi­a­tion of for­eign ex­change. For­eign ex­change is the process of ex­chang­ing one currency for an­other.

FX: Like forex, FX sim­ply stands for for­eign ex­change.

In­ter­bank rate: The in­ter­bank rate is the rate of ex­change that banks and ma­jor fi­nan­cial in­sti­tu­tions around the world se­cure for currency trans­fers. This is the most whole­sale level of for­eign ex­change.

ISO (In­ter­na­tional Or­gan­i­sa­tion for Stan­dard­i­s­a­tion): An in­de­pen­dent global or­gan­i­sa­tion that works along­side other or­gan­i­sa­tions like SWIFT in or­der to main­tain stan­dards in IBAN codes and other reg­u­la­tions. It is also the or­gan­i­sa­tion be­hind glob­ally used currency codes – like ‘GBP’ for pound and ‘EUR’ for euro.

Money trans­fer: A dig­i­tal trans­fer of funds – so no phys­i­cal cash. Wir­ing money, writ­ing a cheque, or oth­er­wise elec­tron­i­cally trans­fer­ring funds are all types of money trans­fer.

Payee: The party be­ing paid. In the world of currency trans­fers, it would sim­ply be the party re­ceiv­ing a money trans­fer and is usu­ally called the ‘re­cip­i­ent’ or ‘ben­e­fi­ciary’.

Quote: Much like how you’re given a quote for a car pur­chase, a quote in the con­text of currency trans­fers would be the of­fered ex­change rate price.

Set­tle­ment date: The date when a con­tract set­tles or ends. All the agreed pay­ments in the con­tract should have been made by this point. With some­thing like a for­ward con­tract, this is the date on which the agreed frozen ex­change rate would stop be­ing avail­able to you.

Spot con­tract: Think of it like an ‘on-the-spot’ con­tract – this term refers to mak­ing an im­me­di­ate currency trans­fer at the cur­rent ex­change rate.

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