Forex Glossary (F)

Commonly used forex terms and their definitions.


Fast Market - Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported, often occurs during major economic releases or serious world event.

Federal Reserve (Fed) - The Central Bank of the United States.

Fed Fund Rate - The interest rate where registered banks can borrow from the Fed. This also indicates the Feds view as to the state of the money supply.

Fibonacci Numbers - The Fibonacci number sequence (1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144,...) is constructed by adding the first two numbers to arrive at the third. The ratio of any number to the next number is 61.8 percent, which is a popular Fibonacci retracement number. The inverse of 61.8 percent is 38.2 percent, also used as a Fibonacci retracement number. It is the ratio of the Fibonacci sequence that is important and valuable, not the actual numbers in the sequence.

Fisher Effect - The relationship that exists between interest rates and exchange rate movements, so that in an ideal situation interest rate differentials would be exactly off set by exchange rate movements. See interest rate parity.

Fixed Exchange Rate - Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention.

Flat/Square - To be neither long nor short is the same as to be flat or square. One would have a flat book if he has no positions or if all the positions cancel each other out.

Flexible Exchange Rate - Exchange rates with a fixed parity against one or more currencies with frequent revaluations, a form of a managed float.

Floating Rate Interest - As opposed to a fixed rate, the interest rate on this type of deal will fluctuate with market rates or benchmark rates. One example of a floating rate interest is a standard mortgage.

Floating Exchange Rate - An exchange rate where the value is determined by market forces. Even floating currencies are subject to intervention by the monetary authorities. When such activity is frequent the float is known as a dirty float.

FOMC - Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.

Foreign Exchange - The purchase or sale of a currency against sale or purchase of another. we trade off-exchange forex transactions.

Foreign Exchange Swap - Transaction which involves the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract (short leg), at a date further in the future at a rate agreed at the time of the contract (the long leg), in reality this is a combination of a spot and an opposite forward deal.

Forward - A deal trade that is executed today for a period longer then two working days (spot value). The forward rate is made up of the spot rate plus or minus the interest rate differentials between the two currencies over time. The interest rate differentials are often known as a premium or discount.

Forex - A term commonly used when referring to the foreign exchange market.

Forex Club - Groups formed in the major financial centers to encourage educational and social contacts between foreign exchange dealers, under the umbrella of Association Cambiste International (ACI).

Forward Margins - Discounts or premiums between spot rate and the forward rate for a currency, normally quoted in points (pips).

Forward Outright - A commitment to buy or sell a currency for delivery on a specified future date or period. The price is quoted as the Spot rate minus or plus the forward points for the chosen period. (See forward).

Forward Rate - (See forward).

Free Reserves - Total reserves held by a bank less the reserves required by the authority.

Front Office - The activities carried out by the dealer, normal trading activities.

Fundamentals - The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

Fundamental Analysis - Thorough analysis of economic and political data with the goal of determining future movements in a financial market.

FX - A term commonly used when referring to the foreign exchange market or a short for foreign exchange. we trade off-exchange forex transactions.


Follow worldbiztoday on Twitter

Currency News