Exchange rate reflects the price of a currency relative to another currency. The foreign exchange market is one of the biggest in the world. Due to  ... more>>the fluctuations of currencies all the time there is the potential for massive profits but there is also the chance to make huge losses. Due to the global nature of the foreign exchange market the market is always open somewhere no matter what hour of the day. This 24 hour nature of the market gives it that feel of a casino where no matter what time of the day, it is always open for business. The US Dollar is the most traded currency on the foreign exchange market. Other highly traded currencies are the Euro, British Pound and Australia Dollar. Economic factors such as unemployment, inflation, the GDP and interest rates can affect the movements of a currency. There are different types of ways to calculate foreign exchange rates. You have nominal and real exchange rates. You also have free or pegged. Most economies used to have a pegged or fixed exchange rate but since then many currencies have switched to a free or floating method to calculate it. Notwithstanding the countrys central bank is able to manipulate the currency.

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