Foreign exchange refers to the flow of currency between countries and the exchange of one country's currency into another country's currency, a specialized business activity to settle international claims and debt relationships.

It is the abbreviation of International Exchange (ForeignExchange).

In summary, foreign exchange is actually the currency held by the monetary administration (central bank, monetary management agency, foreign exchange stabilization fund and Ministry of Finance) in the form of bank deposits, Treasury bills, long-term and short-term government bonds, etc., which can be used when the balance of payments is in deficit.

Claims used include non-marketable bonds resulting from central bank and intergovernmental agreements, whether expressed in the currency of the debtor country or the currency of the creditor country.

Extended information: General classification of foreign exchange: 1. According to the degree of restriction: it is divided into freely convertible foreign exchange, limited freely convertible foreign exchange and accounting foreign exchange.

2. Freely convertible foreign exchange refers to foreign exchange that is most used in international settlements, can be freely bought and sold in the international financial market, can be used to pay off claims and debts in international finance, and can be freely exchanged for the currencies of other countries.

For example, US dollars, Hong Kong dollars, Canadian dollars, etc.

3. Limited freely convertible foreign exchange refers to foreign exchange that cannot be freely converted into other currencies or paid to a third country without the approval of the currency issuing country.

The International Monetary Fund stipulates that any currency that has certain restrictions on current international payments and fund transfers is a limited convertible currency.

More than half of the world's national currencies are limited convertible currencies, including the RMB.

4. Accounted foreign exchange, also known as cleared foreign exchange or bilateral foreign exchange, refers to the foreign exchange recorded in the bank accounts designated by both parties. It cannot be converted into other currencies and cannot be paid to a third country.