Foreign Exchange Market

This article discusses the two types of markets in the foreign exchange market: the spot market and the forward market. It also explains the difference between direct and indirect quotes.

Questions

• What are the two types of markets in the foreign exchange market?
• What is the difference between a direct quote and an indirect quote?
• What are the buy and sell prices in the foreign exchange market?

Answers

• The two types of markets in the foreign exchange market are the spot market and the forward market. The spot market is where transactions are conducted for the spot delivery of currencies, while the forward market is where forward contracts are bought and sold at forward exchange rates.
• A direct quote is a quote where a unit of foreign currency is quoted in terms of domestic currency. An indirect quote is a quote where a unit of domestic currency is expressed in terms of foreign currency.
• The buy price is the price at which the exchange dealer is ready to buy a currency, while the sell price is the price at which the dealer is ready to sell the currency.