Foreign exchange, or forex, is the conversion of one country's currency into another. In a free economy, a country's currency is valued according to the laws of supply and demand. In other words, a currency's value can be pegged to another country's currency, such as the U.S. dollar, or even to a basket of currencies. A country's currency value may also be set by the country's government.

However, most countries float their currencies freely against those of other countries, which keeps them in constant fluctuation.

Factors Affecting Currency Value

The value of any currency is determined by market forces based on trade, investment, tourism, and geopolitical risk. Every time a tourist visits a country, for example, they must pay for goods and services using the currency of the host country. Therefore, a tourist must exchange the currency of his or her home country for the local currency and Ramsons Overseas helps students in this aspect. Currency exchange of this kind is one of the demand factors for a currency.