What Is Currency? Currency is a medium of exchange for goods and services. In short, it’s money, in the form of paper and coins, usually issued by a government and generally accepted at its face value as a method of payment. Currency is the primary medium of exchange in the modern world, having long ago
What Is Currency Appreciation? Currency appreciation is an increase in the value of one currency in relation to another currency. Currencies appreciate against each other for a variety of reasons, including government policy, interest rates, trade balances, and business cycles. Key Takeaways Currency appreciation refers to the increase in value of one currency relative to another in
What Is a Currency Binary Option? Currency binary options offer an all-or-nothing fixed payoff based on an exchange rate in the forex market when the option expires, which can be as little as five minutes after buying the option. Binary options are often used as a means to speculate on currencies, rather than an investment
What Is Currency Depreciation? Currency depreciation is a fall in the value of a currency in terms of its exchange rate versus other currencies. Currency depreciation can occur due to factors such as economic fundamentals, interest rate differentials, political instability, or risk aversion among investors. Key Takeaways Currency depreciation is a fall in the value
What Is a Currency Forward? A currency forward is a binding contract in the foreign exchange market that locks in the exchange rate for the purchase or sale of a currency on a future date. A currency forward is essentially a customizable hedging tool that does not involve an upfront margin payment. The other major
What Are Currency Futures? Currency futures are an exchange-traded futures contract that specify the price in one currency at which another currency can be bought or sold at a future date. Currency futures contracts are legally binding and counterparties that are still holding the contracts on the expiration date must deliver the currency amount at the
What Is Currency in Circulation? Currency in circulation refers to the amount of cash–in the form of paper notes or coins–within a country that is physically used to conduct transactions between consumers and businesses. Currency in circulation is all of the money that has been issued by a country’s monetary authority, minus cash that has
What Is a Currency Option? A currency option (also known as a forex option) is a contract that gives the buyer the right, but not the obligation, to buy or sell a certain currency at a specified exchange rate on or before a specified date. For this right, a premium is paid to the seller. Currency
What Is a Currency Overlay? Currency overlay refers to an investor outsourcing currency risk management to a specialist firm, known as the overlay manager. This is used in international investment portfolios, usually by institutional investors, to separate the management of currency risk from the asset allocation and security selection decisions of the investor’s money managers. Currency overlay
What Is a Currency Pair? A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called the base currency, and the second currency is called the quote currency. Currency pairs compare the value of one currency to another—the
