What is Forex?

What is forex?

Forex — foreign exchange, or FX — is the global market where currencies are exchanged. Every import bill, every remittance from the Gulf, every foreign-portfolio investment into Indian shares and every holiday abroad ends up as a currency exchange somewhere in it.

You’ve already done it

Bought dollars before a trip? A money changer showed you a rate: so many rupees per US dollar. An exchange rate is simply the price of one currency in another. Buying dollars with rupees means you SOLD rupees and BOUGHT dollars.

How big is it?

The Bank for International Settlements surveys the market every three years. Its April 2025 survey measured about USD 9.6 trillion of foreign-exchange trading a day worldwide, which makes it the largest financial market there is. Most of it is banks, companies and funds, not individuals.

Why currencies move

Exchange rates move with trade flows, interest-rate differences, inflation, capital flows and central-bank action. The rupee is managed under a market-determined regime: RBI does not fix the rate, but it can buy or sell dollars to smooth sharp moves.

The India rulebook

Here India differs from most countries. Under FEMA and RBI rules, a resident may take currency positions for trading only through exchange-traded currency derivatives on NSE, BSE or MSE, with a SEBI-registered broker. The contracts cover USD/INR, EUR/INR, GBP/INR, JPY/INR and the crosses EUR/USD, GBP/USD, USD/JPY. Forex or CFD trading on offshore apps is not permitted, and RBI requires that positions in INR pairs hedge a genuine exposure (as of 3 November 2026).

You’ve mastered: What is Forex

Forex is the global market for exchanging currencies; an exchange rate is a relative price

It trades about USD 9.6 trillion a day (BIS survey, April 2025), mostly between banks

The rupee moves with trade, rates and capital flows; RBI can smooth sharp moves

Residents may trade currencies only through exchange-traded currency derivatives in India