What is Forex?

Forex or foreign exchange is the over-the-counter exchange of currencies of various countries. The trading of these currencies is done according to their demand in the foreign market. A process of exchanging one currency with another, Forex facilitates trade, commerce, tourism, etc. between different countries. The foreign exchange market is considered to be the largest and most liquid market in the world. The most-traded forex currencies are the US dollar, the euro, the Japanese yen, and then the British pound. When you opt to go for a holiday outside India to the UK you would need forex for transactions in that country and when you come back, you would need to exchange the leftover pounds to INR.

How it works?

Forex is required when a country or its citizens have business interests abroad. It is also needed by someone who wishes to visit another country for tourism or even for business meetings. For instance, if a country wishes to export items, it receives forex and when it imports items, it has to pay in forex.

There are quite a few ways to buy/sell forex. You can either exchange foreign currencies through a bank or an authorized institution/dealer/person that deals in forex. For forex transactions, certain guidelines have to be followed. The documents needed to buy forex for travelling abroad are:

1. A copy of the passport
2. A copy of the visa (if applicable)
3. A copy of the air tickets
4. A2 form (mentions the amount required, the purpose of visit, amount of forex transacted in the financial year)

While travelling abroad, you can procure forex either in cash or get the amount loaded in a forex travel card. There could be a different pound exchange rate based on when you are buying and on the market fluctuations. Whether you change rupee to any currency or any currency to rupee today, for the transactions, the respective bank/dealer will charge a commission that may vary with each bank/dealer.