A foreign exchange trader with a U.S. bank took a short position of £5,000,000 when the $/£ exchange rate was 1.48. Subsequently, the exchange rate has changed to 1.54. Is this movement in the exchange rate good from the point of view of the position taken by the trader? By how much has the bank’s liability changed because of the change in exchange rate?

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Currency Market

The currency market, also known as the foreign exchange market, consists of currencies worldwide. This market determines the rate of all currencies based on the buying and selling of forex. It is an over-the-counter market. It is the largest and most liquid market based on trade volume.