One issue that matters much to people that every day is to know about foreign currency exchange rates change. This time, let's talk about the different types of change that are handled in the Forex market.
Importantly, in this part of the post, in an operation rate each of the parties undertakes to pay the other a certain amount of currency at an agreed date.
Within these operations, we find the following:
Direct exchange rate: the amount of national currency units to be delivered by a foreign currency. As an example, we use the ratio of euro / dollar.
Indirect exchange rate: as the direct, is the amount of foreign currency to be delivered by a unit of currency, but in this case the ratio is reversed the relationship, which would be dollar / euro.
Spot exchange rate: known as spot market as it is a spot transaction where the date for delivery, which is almost immediate.
Cross rate: known as Cross Rates, is the exchange rate between two currencies, and is so named because it is not common in the country where the currency pair is quoted. For example, in United States GBP / CHF would be considered as a cross rate.
Forward exchange rate: This transaction aims to cover the risk by the difference between the two types of change that an operation is performed. Thus, one can arrange the delivery of some goods to a month, and if the currency in question was the euro, between the date of the agreement and delivery of the goods the dollar could rise against the euro, which the months would cost the seller.
Therefore, there is this "type of coverage" to the risk of buying euros in cash and repay debt term.
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