Currencies Exchange Market
Currencies are monies in general use as legal tender in payment of obligations both by individuals and organizations and in their transfer of funds between their respective banks. A currency in this sense is the currency in any shape or form in use as a medium of trade, usually circulating common coins and banknotes. Money as we normally think of it is a unit of value measured in terms of gold, silver, and other precious metals, but in actuality money is a sum of various physical assets that are holder of various degrees of value depending upon their ability to serve as a medium for trade, their maturity, and other financial aspects. The different units of currency are usually issued by governments. The most widely used in the money market are the US Dollar, the Euro, the Japanese Yen, and the Swiss Franc.
Currencies exchange is a process in which one country’s currency is transferred to another country in an arrangement that is usually governed by the rules set out by the governments of the countries concerned. Most often, the transaction is done through a brokerage firm who transfers the funds from one currency to another in a transaction that is usually regulated by a government agency. This is also known as cross currency transaction or a convertible bond market. Currencies can be bought and sold based on the exchange rate between the two currencies, which usually varies on a daily basis from one country to another.
Many countries throughout the world have been trading in foreign currency since the earliest days of European settlement, although money was primarily issued by barons who were wealthy local individuals. As time passed, many nations began to issue their own money based on their own issuing bank notes. Eventually, these notes became known as ‘fiat’ money because they could never be redeemed by the issuing government in the event of default. In the US dollar, the major currency in currency exchanges, the gold standard was later replaced with the gold exchange standard, which allowed the US government to redeem its money with gold only, and not rely on any other type of legal tender. This system has served most nations well throughout the years, but it has also greatly limited the amount of international trade that takes place as most nations only have one international money supply – the US dollar.