Forex Trading Glossary, Letter "F"

A B C D E F G H I K L M N O P Q R S T U V W

Fast market - "Fast market" means, rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances, price levels may be omitted, and bid and offer quotations may occur too rapidly to be fully reported.

Fed fund rate - The interest rate on Fed funds. This is a closely watched short-term interest rate as it signals the Fed's view as to the state of the money supply.

Fed - The United States Federal Reserve. Federal Deposit Insurance Corporation Membership is compulsory for Federal Reserve members. The corporation had deep involvement in the Savings and Loans crisis of the late 80s.

Federal Reserve system - The central banking system of the U.S. comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership in the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state-chartered banks.

Fill or Kill - An order, which must be entered for trading, normally in a pit three times. If not filled - it is immediately canceled.

Fisher effect - The "Fisher effect" is the relationship that exists between interest rates and exchange rate movements, so that in an ideal situation, exchange rate movements would exactly offset interest rate differentials. See interest rate parity.

Fixed exchange rate - A "fixed exchange rate" is the official rate set by monetary authorities. Often the fixed exchange rate permits fluctuation within a band.

Flexible exchange rate - Exchange rates with a fixed parity against one or more currencies with frequent revaluations. A form of managed float.

Floating exchange rate - An exchange rate, where market forces determine the value. Even floating currencies are subject to intervention by the monetary authorities. When such activity is frequent, the float is known as a dirty float.

FOMC - Federal Open Market Committee, the committee that sets money supply targets in the U.S., which tend to be implemented through Fed Fund interest rates etc.

Foreign exchange - This is the purchase or sale of a currency against sale or purchase of another.

Forex - Foreign Exchange.

Forex club - The "Forex Club" are groups formed in the major financial centers to encourage educational and social contacts between foreign exchange dealers, under the umbrella of Association Cambiste International.

Forward margins - "Forward margins" are discounts or premiums between spot rate and the forward rate for a currency. Normally quoted in points.

Forward operations - Are foreign exchange transactions, on which the fulfillment of the mutual delivery obligations is made on a date later than the second business day after the transaction was concluded.

Forward outright - Is a commitment to buy or sell a currency for delivery on a specified future date or period. The price is quoted as the spot rate minus or plus the forward points for the chosen period.

Forward rate - Forward rates are quoted in terms of forward points, which represent the difference between the forward and spot rates. In order to obtain the forward rate from the actual exchange rate the forward points are either added or subtracted from the exchange rate.

The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market.

Therefore, the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.

Free reserves - Are the total reserves held by a bank minus the reserves required by the authority.

Front office - The activities carried out by the dealer I.e. Normal trading activities.

Fundamentals - Are the macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

FX - The Foreign Exchange.

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