Forex Definitions

Currency Swap

A swap that involves the exchange of one currency (e.g., US dollars) for another (e.g., Japanese yen) on a specified schedule.

Currency Cross

A currency cross is any currency pair that does not include the US Dollar as either the base or counter currency. An example of a currency cross is the GBP/JPY pair.

Currency

A medium of exchange that is in public circulation in an economy.

Cross Rate

In foreign exchange trading, the price of one currency in terms of another currency in the market of a third country. For example, the exchange rate between Japanese yen and Euros would be considered a cross rate in the US market, whereas in Japan or a European Mo

Counter Currency

In the world of forex trading the base currency refers to the second currency in a currency pair such as eur/usd. See also: Base Currency

Pip

Pip stands for percentage in point. It is the smallest price unit of a commodity or currency. In the Forex market prices are quoted to the fourth decimal point.

Commodity Currencies

Refers to to currencies that are closely tied to the value of commodities such as gold and oil. The Australian Dollar, Canadian Dollar, New Zealand Dollar and the Swiss Franc all have a strong positive correlation with commodities and are sometimes referred to as commodity currencies.

Yen Bond

A bond denominated in Japanese Yen.

Yard

In Forex trading jargon, a yard means a billion units.

Carry Trade

The carry trade strategy is based on buying a high interest yielding currency and selling a low yielding currency. This allows the trader to earn the difference in the interest rates between the two currencies, referred to as the interest rate differential. The di