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Forex Education

What Is An Exchange Rate?




The foreign exchange market is a global decentralized marketplace that determines the relative values of different currencies. Unlike other markets, there is no centralized depository or exchange where transactions are conducted. Instead, these transactions are conducted by several market participants in several locations. It is rare that any two currencies will be identical to one another in value, and it's also rare that any two currencies will maintain the same relative value for more than a short period of time.  In forex, the exchange rate between two currencies constantly changes.

For example, on January 3, 2011, one euro was worth about $1.33.  By May 3, 2011, one euro was worth about $1.48.  The euro increased in value by about 10% relative to the U.S. dollar during this time.

 

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