What does 'FX' stand for in finance?

In finance, “FX” stands for foreign exchange.

Foreign exchange means converting one currency into another, while the foreign exchange market is the global network where those transactions occur. Currencies are quoted in pairs, such as EUR/USD or USD/JPY, because every exchange simultaneously buys one currency and sells another. The quoted rate therefore expresses a relative value rather than an absolute one.

The FX market supports international commerce: an importer may need to pay a supplier in euros, while its revenue is earned in dollars. Banks, central banks, corporations, investment funds, brokers, and individual traders all participate. Unlike a single stock exchange, most FX dealing is over the counter through interconnected financial institutions.

“Forex” is another widely used term for foreign exchange, especially in retail trading. FX should not be confused with “futures exchange”: currency futures are only one type of instrument used to gain exposure to exchange rates. Other FX instruments include spot trades, forwards, swaps, and options.