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.