Carry Trade
A carry trade borrows or sells a low-interest-rate currency to hold a higher-interest-rate one, aiming to earn the interest-rate difference. It is exposed to exchange-rate moves that can erase or exceed that difference.
Investment & trading encyclopedia
Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.
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Currency Pair
A currency pair quotes the price of one currency, the base, in units of another, the quote currency. In EUR/USD the euro is the base and the US dollar is the quote, so a price of 1.2500 means 1 euro costs 1.2500 US dollars.
Exchange Rate
An exchange rate is the price of one currency expressed in another currency. It is set by supply and demand under a floating regime, or managed within limits by policy under a peg or band.
Forex (Foreign Exchange)
Forex is the global market where one currency is exchanged for another. It has no single central exchange: banks, brokers, companies, funds and central banks trade through dealer networks and electronic platforms.
Pip
A pip is the conventional unit for measuring a forex price move. It is usually the fourth decimal place (0.0001) of a quote, but the second decimal place (0.01) for pairs quoted in Japanese yen.