Foreign exchange

Synthetic FX Forward Using Options How buying a call and selling a put at the same strike creates a synthetic FX forward, replicating forward contract economics using options.

Target Redemption Forward (TARF) Explained A TARF is a structured currency forward that accumulates gains until a profit target is hit, then terminates—creating asymmetric risk for hedgers who benefit from favorable moves but face capped upside.

The Balance-Sheet Cost of FX Intervention Examine how central bank balance sheet costs arise from foreign exchange intervention, including valuation losses on reserve accumulation.

The EUR/CHF Floor: How a Currency Peg Breaks In January 2015, the Swiss National Bank suddenly removed its EUR/CHF floor, a 3-year currency peg. Learn what caused the break and its aftermath for traders.

Tick Size (Forex) Minimum price increment for currency pairs in foreign exchange markets, determining precision and bid-ask granularity.

Tick Size, Lot Size, and Pip Value Across Currency Pairs Pip value varies across currency pairs and lot sizes. Learn how to calculate monetary pip worth for different quote currencies and position sizes.

Tobin Tax A proposed small levy on currency transactions to reduce short-term speculation and stabilise exchange rates.

Tom-Next in FX A one-day forex swap rolling a position from tomorrow to the next spot date, commonly used to bridge or extend FX exposures without locking in a long-term forward rate.

Trade Invoicing Currency vs Reserve Currency: Key Differences Understand the distinction between invoicing currency (used to price trade) and reserve currency (held by central banks), and why they're often linked but independent.

Transaction, Translation, and Economic Currency Risk Transaction, translation, and economic currency risk are three types of FX exposure: from cash flows, accounting, and competitive positioning. Each requires different hedging.

Triangular Arbitrage A strategy exploiting price discrepancies across three currency pairs, buying and selling to lock in a risk-free profit when the cross-rates are misaligned.

Triangular Arbitrage in Forex: Example and Mechanics Walk through a triangular arbitrage forex example showing how traders exploit currency mispricings across three pairs to lock in risk-free profit.

Triangular Arbitrage in Forex: Mechanics and Limits How triangular arbitrage forex exploits price discrepancies across three currency pairs simultaneously.

Triffin Dilemma The structural contradiction between supplying global liquidity and maintaining a currency's value—a tension that has shaped international monetary systems for seventy years.

Turkish Lira The TRY as a chronically weak currency shaped by persistent inflation, unorthodox monetary policy, and a history of currency crises illustrating reserve-currency deterioration.

Two-Tier Exchange Rate A dual exchange-rate system separating commercial trade from financial capital flows, insulating the real economy from destabilising speculation.

Two-Way Price Quotes in Forex Explained In forex, dealers quote a two-way price with a simultaneous bid and offer. The spread between them is the dealer's compensation for providing liquidity.

UAE Dirham The AED's fixed dollar peg and the UAE's strategy to position Dubai as a regional financial and reserve-currency hub.

Uncovered Interest Rate Parity The theory that interest rate differentials between currencies equal the expected depreciation of the higher-yielding currency.

Unilateral Dollarization: Pros and Cons Pros and cons of unilateral dollarization: giving up monetary policy for currency stability and US seigniorage benefits.

Unsterilized Intervention Foreign exchange operations where a central bank buys or sells currency without offsetting the change to domestic money supply.

US Dollar The US dollar is the currency of the United States and the world's dominant reserve currency. It is the most widely held foreign currency, the vehicle for most international transactions, and the anchor for many other currencies.

US Dollar Hegemony The dominant role of the US dollar in international trade invoicing, debt issuance, and central-bank reserve holdings.

US Dollar Index (DXY) A basket of six major currencies weighted against the US dollar; the primary gauge of broad US currency strength and a key indicator for commodities, emerging markets, and macro positioning.

USD/CAD: The Loonie The US dollar-to-Canadian dollar exchange rate; a commodity-linked pair whose movements are heavily influenced by crude oil prices and bilateral trade flows between the US and Canada.

USD/CHF: The Swissie The US dollar-to-Swiss franc exchange rate; a flight-to-safety currency pair that typically weakens during global crises when the franc appreciates as a safe-haven asset.

USD/JPY Dollar-Yen US dollar to Japanese yen currency pair reflecting safe-haven dynamics and interest-rate differentials.

USD/MXN: The Dollar–Mexican Peso Pair USD/MXN is the US dollar to Mexican peso pair, highly liquid and driven by oil prices, remittances, trade flows, and US–Mexico economic integration.

USD/SGD: The Dollar–Singapore Dollar Pair USD/SGD tracks the exchange rate between the US dollar and Singapore dollar, shaped by Singapore's unique managed-float regime under the Monetary Authority.

USD/TRY — Dollar to Turkish Lira Pair How USD/TRY is driven by inflation differentials, central bank credibility, and current-account deficits, and the risks of trading a volatile emerging-market pair.

USD/ZAR — Dollar to South African Rand The USD/ZAR currency pair pairs the U.S. dollar against South Africa's rand—a commodity-sensitive emerging-market pair shaped by gold, platinum exports, and political risk.

Using Currency Pair Correlation in FX Trading Currency pair correlation measures how two pairs move together or opposite, affecting position sizing, portfolio diversification, and hidden leverage in forex.

Value Date vs Settlement Date in Forex Understand the difference between the value date when forex rates are set and the settlement date when cash actually changes hands.

Vanilla FX Option A vanilla FX option is a standard currency option: a call (right to buy) or put (right to sell) a currency pair at a strike price on or before a specific date. Vanilla options are the building blocks; exotic options add special features.

Vanna-Volga Pricing Market-standard FX options valuation method that adjusts Black-Scholes for the cost of hedging vanna and volga Greeks against the volatility smile.

Verbal Intervention Central bank statements and public guidance used to influence exchange rates without transacting.

Warning Signs That a Currency Peg Is About to Collapse Observable signals that a fixed currency peg is breaking—reserve depletion, forward premium, interest rate gaps, and real-exchange-rate misalignment.

Weekend Gap The price discontinuity in FX pairs when markets reopen Monday after events or economic data released while markets were closed.

Weekend Gap Risk in Currency Pairs Forex prices can jump sharply between Friday close and Sunday open. Gap risk is highest in exotic pairs and during geopolitical events.

What Causes Price Gaps in Forex Markets Price gaps in forex markets occur when currency pairs open at a different level than they closed, driven by weekend closures, economic data, and central bank surprises.

When Currency Boards Collapse: Conditions and Warning Signs Currency boards break down when foreign reserves deplete, government fiscal discipline weakens, or political pressure forces abandonment—Argentina 2001 is the canonical historical example.

When FX Intervention Works and When It Fails When does FX intervention work to move exchange rates? Central banks succeed when conditions align, but market forces often overwhelm.

Why Deep Capital Markets Are Essential to Reserve Currency Status Foreign central banks require large, liquid, and open bond markets before holding a currency in size. Capital market depth is foundational to reserve currency status.

Why Forex Spreads Widen During News Events Discover why bid-ask spreads expand during economic releases and sudden market shocks, and what it means for your execution cost.

Why Forex Spreads Widen During News Events Understand why forex spreads widen around news releases: liquidity evaporates, uncertainty spikes, and market makers face wider two-way risk.

Why the Dollar Share of Global Reserves Is Declining Why is dollar share of global reserves declining due to diversification, euro growth, and renminbi inclusion.

WM/Reuters Fix The daily 4 pm London benchmark rate for currency pairs, its calculation methodology, and the LIBOR-scale manipulation scandal that exposed its vulnerability.

Yuan (Chinese Renminbi) China's increasingly internationalized currency, subject to managed floating-rate policy and gradual liberalization since 2005.