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Currency Exchange vs. Forex: Differences You Need to Know

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Currency exchange market has always been a subject of interest to many people for different reasons.

We will help you know more about currency exchange vs. Forex.


Let’s get started!


Currency Exchange Market 

The "Currency" term refers to the monetary unit used in countries to buy goods and services or to pay taxes, such as US Dollar, British Pound, Euro, and Japanese Yen. 


The mentioned currencies are the most wanted for investment purposes around the world. 


In this sense, currency exchange means exchanging one currency for another according to the exchange rate at the moment when exchange happens, for example, exchanging US dollar with JOD or vice versa.

When Do I Need to Exchange Currency?

If you are planning to travel abroad, it is better to exchange currency beforehand, depending on the currency of the other country. Or in case you want to pay for educational fees, and your college is only accepting foreign currencies.  


Further, investors and businessmen need to exchange currency to pay for the imported goods and to share profit with the company's partners, etc. In other cases, investors need to exchange foreign currency to the local one to save funds and reinvest them locally later on.

Where Currency Exchange Takes Place

This service is available in several exchange houses and banks, with slightly different rates from one service provider to another. 


However, this slight difference in rates can result in a good gain when exchanging a high amount of money.


If you're living in Jordan, you can always find the best exchange rate at Abu Sheikha Exchange stores. Discover the nearest branch here

How Exchange Rate is Determined

Currency exchange rates are ever-changing on a daily basis, and it is decided based on a fixed price determined by the central bank of the country that issues the currency. In this case, it is called a fixed currency exchange rate.


In other cases, currency exchange rate can be determined by the supply and demand between local currency against and global currency. 


In some situations, currency rate can be directly affected depending on economic, political, and social factors of the country that issues the currency. 

Currency rate increases when demand rate increases and vice versa.


Banks in all countries are connected through a network where currency exchange rates are determined. 


Forex Market

On the other hand, Forex is a market where foreign currency trading happens. For example, one can exchange the US dollar for the Euro, and this market is one of the largest and most liquid financial markets in the world, where trillions of dollars are traded every day. 


How does Forex Market work?

The market determines the value of foreign currencies, and foreign currencies exchange can be limited, such as changing one currency to another in a local bank. These financial transactions may also involve trading huge amounts of currencies in the foreign exchange market.


During the currency trading process, currencies are listed in pairs, such as USD / CAD, EUR / USD, USD / JPY, and the symbol (USD) refers to the US Dollar, (CAD) refers to the Canadian Dollar, (EUR) refers to the Euro. In contrast, the symbol of the Japanese Yen is (JPY).  


There is a price associated with each pair of those currencies, for example, if the price 1.2569 is associated with the currency pair USD / CAD, then this means that it costs 1.2569 Canadian Dollar to buy one US Dollar, and if the price increases to 1.3336, the cost will now become 1.3336 Canadian Dollar against one US Dollar. 


The Forex market is unique and differs from many traditional currency markets, the volume of trading in this market is generally large, and it is open 24 hours a day, five days a week through the major financial centers around the world. 


This means it is possible to buy or sell currencies through this financial market at any time during the day.  

Forex vs. Currency Exchange

Currency exchange is done for individuals and organizations for multiple purposes either personal or commercial reasons through exchange houses and banks.


On the other hand, Forex is considered an investment that aims at currency speculation, similar to what happens in the stock market.

you can always find the best exchange rate at Abu Sheikha Exchange stores. Click here to get the directions to your nearest abusheikha branch