Baptizing into Foreign Exchange
Let us say that Mugen and Jin (of Samurai Champloo) had extended their journey to the US this time in the search of a samurai that smells of hamburger and fries; to eat and seek lodging, they had to change their Ryou to US dollars. That fictional scenario is just a small example of foreign exchange (Forex).
Forex is a trading of money into different currencies. Others would say exchange rate, as it is otherwise known, is a price. Back to Mugen to illustrate this: Let's say that a Ryou in Japan would exchange for two big bottles of sake. Or in other words, one Ryou equals two bottles of sake. If one only had half a Ryou, they would get only one bottle.
As far as the tavern owner is concerned that means money (Ryou) can be bought at a rate of two bottles of sake (or even a bottle). From the tavern owner's view, the price of half Ryou is one-half of two bottles of sake. If the price is two Ryou for two sakes, the tavern would only supply half a bottle to earn half a Ryou.
In the same manner (and in the real world), an exchange rate of one pound equals to three deutschmark means that the price of a deutschmark in UK currency is at 0.33 of a pound. To a German, the cost of a pound would cost three deutschmark. For continental Europe and Japan, exchange rate is the price of foreign currency in direct quotation.
Half a decade ago, the necessity of knowing about exchange rates might have been confined to academic curiosity as the main reason. But when the world laid witness to the crashes in Asia, it justified devotion to the subject. An exchange rate or foreign exchange rate is no longer a hidden interest to be kept among a handful of enthusiasts; every man on the street must be aware of it.
It seems now that every subject under discussion the answer revolves around exchange rates. The outlook of domestic and worldwide economies, the stock market and even the results of the election are touched by exchange rates. With that the prospect of ever turning one's back to foreign exchange rates is not going to happen again.
The heightened importance to the exchange rate is brought by some range to the internalization of businesses, countries trade with each other and the high speed of money transfer in every part of the world.
It great elusiveness makes them a wild card: it could be the death of a deal or a turning point to profit. And it is also of this changeableness that makes it an enticing investment.
So while Mugen and Jin are just worried about their vacation funds, the rest of us now know that we must always be aware of Forex and how it effects the bigger picture.