The firm is likely to be paid or have profits in a different currency and will want to exchange it for its home currency.
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It is also regarded as the value of one country’s currency in relation to another currency. For example, an interbank exchange rate of 119 Japanese yen (JPY, ? 119 will be exchanged for each US$1 or that US$1 will be exchanged for each ? In this case it is said that the price of a dollar in relation to yen is ?
119, or equivalently that the price of a yen in relation to dollars is $1/119.
Because of the volatility in the price of foreign currency, losses can accrue very rapidly, wiping out an investor’s down payment in short order.
Any company operating globally must deal in foreign currencies.
It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.