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- Foreign exchange, or forex, is the conversion of one country’s currency into another.
- In a free economy, a country’s currency is valued according to the laws of supply and demand.
- In other words, a currency’s value can be pegged to another country’s currency, such as the U.S. dollar, or even to a basket of currencies.
- A country’s currency value may also be set by the country’s government.
- However, most countries float their currencies freely against those of other countries, which keeps them in constant fluctuation.
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