Exchange rates

An exchange rate is the rate at which one country's currency can be traded in exchange for another country's currency.

The spot rate is the exchange rate currently offered on a particular currency for immediate delivery.

A forward rate is an exchange rate set now for currencies to be exchanged at a future date.

? Foreign exchange demand

If an importer has to pay a foreign supplier in a foreign currency, they might ask their bank to sell them the required amount of the currency, so that they can make the payment. For example, suppose that a UK bank's customer, a trading company, has imported goods for which it must now pay US$10,000.