Some major currencies are exchanged on an open market, which is also known as forex, while other currencies are exchanged in bank-based foreign exchange. Forex is done by brokers that use computer programs to complete transactions. Forex trading involves different types of risk and a broker's spread represents the difference between the buy and sell prices offered by a broker. Any transaction in foreign exchange involves a conversion from one currency to another country's currency.
There are many factors that affect forex rates worldwide, such as inflation, unemployment rates, trade balances, and political stability.
The exchange rates for currencies are set by the market. For this reason, the value of a country's money fluctuates based on how demand for it changes in comparison to other currencies. When demand for a country's currency increases, its value should rise because the supply of money is limited. The opposite should happen when there is less demand.