Base Currency
The first currency listed in a forex pair, representing the unit being bought or sold against the quote currency.
Bretton Woods
The 1944 international monetary agreement that established fixed exchange rates pegged to the US dollar and gold.
Carry Trade Return
Total return from borrowing in a low-rate currency and investing in a high-rate currency.
Carry Trade
Borrowing in a low-interest-rate currency to invest in a higher-yielding currency, profiting from the rate differential.
Currency Appreciation
An increase in the value of one currency relative to another in the foreign exchange market.
Currency Depreciation
A decline in the value of one currency relative to another in the foreign exchange market.
Currency Hedging
A strategy to reduce or eliminate exposure to adverse exchange rate movements.
Currency Pair
The quotation of two currencies together, showing how much of the quote currency is needed to buy one unit of the base currency.
Currency Peg
A policy fixing a country's exchange rate to another currency or basket to stabilize trade and inflation.
Currency Reserve
Foreign currency held by a central bank to manage exchange rates, settle debts, and maintain market confidence.
Devaluation
A deliberate government decision to lower a currency's fixed exchange rate, making exports cheaper.
Eurodollar
US dollar deposits held in foreign banks outside the United States, forming a vast global interbank lending market.
Exchange Rate Regime
The policy framework a country uses to manage its currency's value relative to other currencies.
Fixed Exchange Rate
An exchange rate pegged at a set level, maintained by the central bank through market intervention.
Floating Exchange Rate
An exchange rate determined freely by market supply and demand, without a government-set target.
Pip
The smallest standard price movement in a forex pair, used to measure exchange rate changes and profit and loss.
Forward Rate
The agreed exchange rate or yield for a transaction that will be settled at a specified future date.
FX Cross Rate
A currency exchange rate derived indirectly via a common third currency (usually USD).
Interest Rate Parity
The no-arbitrage forward exchange rate implied by the interest rate differential between two countries.
Managed Float
An exchange rate system where a currency floats freely but the central bank intervenes to dampen excessive volatility.
Petrodollar
US dollars earned by oil-exporting nations from petroleum sales and recycled into global financial markets.
Reserve Currency
A currency held in large quantities by central banks and used in international trade and debt contracts.
Revaluation
A deliberate upward adjustment of a currency's fixed exchange rate, making it stronger against other currencies.
Safe-Haven Currency
A currency that holds or appreciates in value during global uncertainty as investors seek stability.
Spot Rate
The current market price for immediate delivery and settlement of a currency, commodity, or security.