Forex

Forex stands for foreign exchange, and therefor the Forex market, refers to the virtual arena in which currencies are traded.

Foreign Exchange (Forex) also stands for the currency of another country, generally an accepted currency for international trade.
Foreign currency trading is done mainly by banks and other official institutions usually done by exchanging currency of one country with that of another.
Today, the forex market is considered to be the largest and most sophisticated financial market in the world, involving commercial banks, central banks, currency speculators, corporations, governments and other institutions.
Forex trading is done around the clock in London, Tokyo, New York, Frankfurt and many other cities. When the Asian market is closed, the European market and/or the U.S are open and vice versa.

Exchange rate fluctuations

The exchange rate is the value of one foreign currency unit in terms of the local currency.

Below listed the most important variables that can cause a depreciation or appreciation of a certain currency:

Local economic stability and credit ratings made by international rating companies.
Balance of payments – a deficit in the Balance of payments causes a selling pressure on the local currency leading to its depreciation.
Interest rates practiced in the economy. High interest rates, attracts buyers appreciating the Local currency. The only thing that matters is the gap between the domestic and foreign interest rates and not its absolute value.
Political and security status in the domestic market and the foreign currency markets.