Fx trading - More about how it works
While any trader will tell you that a Forex trade requires only two currencies, that is not really true in all cases. Since the beginning of the Foreign exchange market, USD, (United States Dollars) has been considered the base currency of foreign exchange. Today, as all calculations are being done by computer, adding (or more correctly maintaining) an intermediate step in the trade of non-USD currencies is just a detail. But here is the detail. In a trade of JPY/EUR (Japanese Yen to Euro), the conversion of obth currencies to dollars is the first step in the trade.
In our lifetime, this may end as trading programs become more sophisticated. There are also murmurs of attempts to replace the USD as the international transfer standard with the new (currently non-existent coin called) Golden Dinar. This coin would be either Saudi or Bahraini, and would be a gold coin of a specific weight. The theory being that a true gold coin would be a more stable standard to pin the currency market to.
