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 UK pound, 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.