Brief glossary of currency terms in simple, understandable language, with examples

List of Concepts and Terms

• A
• B
• C
• D
• E
• F
• H
• I
• M
• N
• O
• Q
• R
• S
• V
• W

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A

Ask ↗

Ask is the price at which a bank, broker, or other market participant is willing to sell currency or securities to a client. In currency operations, the ask reflects the rate at which a bank or broker (the seller) sells foreign currency to a client. See also Bid
Example: EUR/USD quotation 1.1000/1.1002 → ask = 1.1002.

ATM ↗ (Geldautomat, Automated Teller Machine)

ATM — is an electronic device that allows bank customers to withdraw or deposit cash, pay for services, and perform other banking operations using a payment card without the need for a teller.
Example: A customer withdraws €100 from a Deutsche Bank ATM.

B

Bank

Bank is a financial institution that accepts deposits, provides loans, conducts foreign exchange operations, and offers various services related to money management and payments. See also Central bank

Banknote

Banknote — is a paper or polymer monetary unit issued by a country's central bank, having a fixed denomination and circulating as legal tender. See also Denomination
Example: Euro banknotes: denominations of 5, 10, 20, 50, and 100 euros.

Base currency ↗ (Basiswährung)

Base currency is the currency against which other currencies are quoted and in which the trading volume is denominated. See also Quote currency
Example: In the GBP/USD currency pair, the base currency is the British pound and the quote currency is the US dollar.

Bid ↗

Bid is the price at which a bank, broker, or other market participant is willing to buy a currency or securities. In currency transactions, the bid reflects the rate at which a bank or broker (the buyer) is ready to purchase foreign currency from a client. See also Ask
Example: EUR/USD quotation 1.1000/1.1002 → bid = 1.1000.

Bitcoin (BTC)

Bitcoin (BTC) is the first and most well-known cryptocurrency, created in 2009 to enable decentralized electronic payments without the involvement of banks or governments. See also Cryptocurrency

C

Cash (Bargeld)

Cash — is the physical form of money (banknotes and coins) used for direct payments between individuals and organizations. See also Non-cash money
Example: A 50-euro banknote, a 1-euro coin.

Central bank (Zentralbank)

Central bank is the main bank of a country that issues the national currency, regulates monetary policy, and supervises the activities of commercial banks. See also Bank, Money issuance

Contactless payment ↗ (Kontaktloses Bezahlen, NFC)

Contactless payment is a method of making payments where money is withdrawn from a card or electronic device (such as a phone or smartwatch) without physically inserting the card into a terminal — using NFC (Near Field Communication) technology.
Example: Paying for coffee in Berlin using Apple Pay.

Cross rate ↗ (Kreuzkurs)

Cross rate is an exchange rate that expresses the relationship between two foreign currencies, calculated through a third currency (usually the US dollar).
Example: If EUR/USD = 1.10 and USD/JPY = 150.00, then to find the cross rate EUR/JPY you need to multiply these quotations: EUR/JPY = EUR/USD × USD/JPY = 1.10 × 150 = 165.

Cryptocurrency ↗ (Kryptowährung)

Cryptocurrency is a digital (virtual) currency that has no physical form and operates on blockchain technology using cryptography to secure transactions. See also Bitcoin, Ethereum
Example: Bitcoin (BTC) — the first cryptocurrency, created in 2009.

Currency ↗ (Währung)

Currency — is the money unit of a country that is used for domestic payments as well as in international economic relations.
Example: The national currency of Germany is the euro (EUR). It is a freely convertible currency.

Currency conversion ↗ (Währungsumrechnung)

Currency conversion — is the process of exchanging one currency for another at the applicable exchange rate during payments, transfers, or international transactions.
Example: A traveler exchanges euros for US dollars before a trip. Payment abroad with a card where currency conversion occurs automatically.

Currency convertibility (Konvertierbarkeit von Währungen)

Currency convertibility is the ability of a national currency to be freely exchanged for foreign currencies in trade, financial, and investment operations. A currency can be freely convertible, partially convertible, or non-convertible.

Currency exchange rate ↗ (Wechselkurs für den Währungstausch)

Currency exchange rate is the rate at which one currency is exchanged for another in banks, exchange offices, and on the foreign exchange market. See also Official exchange rate
Example: The official dollar rate is 95 RUB, but in a bank the exchange rate may be 96 RUB for buying and 94 RUB for selling.

Currency quotation ↗ (Devisennotierung)

Currency quotation is the determination of the exchange rate of a foreign currency against the national or another foreign currency, usually carried out by banks or financial institutions.
Example: If the EUR/USD quotation is 1.08, it means that 1 euro equals 1.08 US dollars. In Russia, the dollar is quoted in rubles (e.g., 1 USD = 95 RUB).

Currency union ↗ (Währungsunion)

A currency union is an agreement between several countries to use a common currency or closely coordinate their monetary policies in order to strengthen economic stability and simplify international payments.
Example: Eurozone — a currency union of EU countries using the euro (EUR).

D

Denomination (Nennwert)

Denomination — is the face value printed on a banknote, coin, security, or other financial instrument. Each banknote or coin has its own denomination indicated on its surface. See also Banknote
Example: A banknote with a denomination of 10 euros means it is worth 10 units of the currency.

Deposit ↗ (Einlage)

Deposit is money placed by a client in a bank or other financial institution under the condition of repayment and earning income (interest). See also Foreign currency account
Example: Foreign currency deposit in euros.

Deposit Guarantee ↗ (Einlagensicherung, Deposit Guarantee Scheme, DSG)

The Deposit Guarantee Scheme is a public and private protection mechanism that safeguards customers’ funds in the event of a bank’s insolvency. It guarantees the repayment of deposits up to a legally defined limit and plays an essential role in maintaining financial stability.
Example: If a bank in Germany becomes insolvent, a depositor with an €80,000 balance receives full compensation.

Direct quotation (Direkte Notierung, Direct exchange rate)

Direct quotation (Direct exchange rate) shows how many units of the national currency must be paid for one unit of foreign currency. The foreign currency is the base, and the national currency is the quote. See also Indirect quotation
Example: In the USA (national currency = USD), a direct quotation is: 1 EUR = 1.10 USD. In Germany (national currency = EUR), a direct quotation is: 1 USD = 0.95 EUR.

Dynamic Currency Conversion ↗ (Dynamische Währungsumrechnung, DCC)

Dynamic Currency Conversion (DCC) — is a service that allows a cardholder, when paying abroad, to choose the currency of the transaction — either the local currency or the currency of their card.
Example: In Poland, for example, a customer may choose to pay in zlotys (the local currency) or in euros. If euros are selected, the amount is recalculated using the terminal’s DCC rate.

E

E-money ↗ (Elektronisches Geld, electronic money)

E-money (electronic money) is a form of non-cash money stored on electronic devices (bank cards, e-wallets, apps) and used for cashless payments.
Example: Euros in PayPal

Ethereum (ETH)

Ethereum (ETH) is a cryptocurrency and blockchain platform designed to work not only with digital money but also with smart contracts and decentralized applications. See also Cryptocurrency

Eurocurrency ↗ (Eurowährung)

Eurocurrency is a currency deposited outside its country of origin, usually in foreign banks or their branches. It is important not to confuse Eurocurrency with the euro.
Example: US dollars held in a London bank are considered Eurodollars.

European Union (Europäische Union, EU)

The European Union (EU) is an economic and political union of several European countries, established to promote joint development, the free movement of goods, services, and capital, and to implement a common economic and monetary policy — as well as to support tourism.
Example: Germany, France, Italy, and Spain are the largest economies in the EU.

Eurozone ↗

Eurozone is an association of several European Union countries that have adopted the euro as their official currency.
Example: Germany is part of the Eurozone, and its official currency is the euro.

F

FinTech service ↗ (FinTech-Service, financial technology service)

A FinTech service (FinTech company) is a digital financial service or application based on new technologies that offers banking or similar financial services through innovative solutions (for example, online payments, mobile banking, or P2P lending). See also Bank

Fixed exchange rate (Fester Wechselkurs)

A fixed exchange rate is a currency system in which the value of a national currency is set and maintained by the government (usually through the central bank) at a specific level relative to another foreign currency or a basket of currencies.
Example: The Danish krone (DKK) is pegged to the euro within the ERM II mechanism.

Fixed-term deposit ↗ (Festgeld, certificate of deposit, time deposit, term deposit)

A fixed-term deposit is a bank deposit with a predetermined term and a fixed interest rate, where the funds cannot be withdrawn before the end of the term without losing the agreed conditions. Some banks also offer fixed-term deposits in foreign currencies. See also Foreign currency deposit
Example: An individual opens a fixed-term deposit in Germany for €10,000 with a 12-month term and a fixed interest rate of 1.50 % per year — at maturity, they receive €10,150.

Foreign currency account ↗ (Fremdwährungskonto)

Foreign currency account — is a bank account opened in foreign currency for storing funds, making international settlements, and conducting currency transactions. See also Deposit
Example: An individual keeps savings in a euro deposit account.

Foreign currency deposit ↗ (Fremdwährungseinlage)

A foreign currency deposit is a bank deposit held in a currency other than the euro — for example, US dollars (USD), Swiss francs (CHF), or British pounds (GBP). It allows savers to earn interest in a foreign currency but comes with exchange rate risk. See also Fixed-term deposit
Example: A client deposits 10,000 USD for 12 months at 2 % interest — receives 10,200 USD; the euro value depends on the exchange rate.

Foreign exchange reserve (Währungsreserve)

Foreign exchange reserve is the stock of foreign currency held by a central bank or government to maintain the stability of the national currency and to conduct international settlements.

Forex ↗ (Foreign Exchange Market, FX)

Forex (Foreign Exchange Market) is the international currency exchange market where banks, companies, investors, and traders buy and sell currencies at free-floating exchange rates. It is the largest and most liquid financial market in the world.
Example: The EUR/USD currency pair is one of the most traded on Forex.

Freely convertible currency ↗ (Frei konvertierbare Währung, FCC)

Freely convertible currency (FCC) is a national currency that can be exchanged without restrictions for any other foreign currency for any type of transaction anywhere in the world. See also Hard currency
Example: Euro (EUR) is a freely convertible currency that can be used almost anywhere in the world.

H

Hard currency ↗ (Harte Währung)

Hard currency is a foreign currency that is stable, highly liquid, and trusted on the global market, which is why it is widely used in international transactions. See also Freely convertible currency, Soft currency
Example: The US dollar and the euro are considered hard currencies.

I

Indirect quotation (Indirekte Notierung, Indirect exchange rate)

Indirect quotation (Indirect exchange rate) shows how many units of foreign currency must be paid for one unit of the national currency. The national currency is the base, and the foreign currency is the quote. See also Direct quotation
Example: In the USA (national currency = USD), an indirect quotation is: 1 USD = 0.95 EUR. In Germany (national currency = EUR), an indirect quotation is: 1 EUR = 1.10 USD.

Inflation

Inflation is the process of money losing its value, expressed through the rise in prices for goods and services, as the purchasing power of a currency decreases over time.
Example: Inflation in the eurozone in 2023 was around 5%, mainly due to rising energy prices.

International Monetary Fund ↗ (Internationaler Währungsfonds, IMF)

International Monetary Fund (IMF) is an international financial organization that promotes the stability of the global monetary system, supports cooperation among countries in monetary policy, and provides loans to governments.

M

Monetary policy (Geldpolitik)

Monetary policy is a set of measures implemented by a central bank to regulate the money supply, interest rates, and overall financial stability of a country. Its main objectives are to ensure price stability, support economic growth, and control inflation.

Money issuance (Geldemission)

Money issuance is the creation of new money (cash or non-cash) by the central bank to provide the economy with means of payment. See also Central bank

N

Non-cash money (Buchgeld, Cashless payment)

See also Cash
Example: Payment for goods in an online store by bank card. International transfer via the SWIFT system.

O

Official exchange rate ↗ (Offizieller Wechselkurs)

Official exchange rate is the price of one currency expressed in units of another currency, i.e. the ratio of exchange between the monetary units of different countries. See also Currency exchange rate
Example: Exchange rate EUR/USD = 1.10 means that 1 euro equals 1.10 US dollars.

Q

Quote currency ↗ (Kurswährung, Counter currency)

Quote currency is the currency in which the value of the base currency is expressed when forming an exchange rate quotation. See also Base currency
Example: In the EUR/USD pair, the quote currency is the US dollar.

R

Reserve currency ↗ (Reservewährung)

Reserve currency is a foreign currency held by governments and central banks to build up foreign exchange reserves, make international payments, and repay debts.
Example: US dollar (USD) — the largest global reserve currency.

S

SEPA (Single Euro Payments Area)

SEPA (Single Euro Payments Area) is a pan-European system that enables cashless transfers and payments in euros between EU countries and several other states under the same conditions as domestic payments within a single country. See also SWIFT

Soft currency (Weiche Währung)

Soft currency is a national currency that is prone to devaluation, has low stability, and limited use in the international market. See also Hard currency

Spread

Spread is the difference between the buying rate and the selling rate of a currency, which serves as a source of income for banks and exchange offices.
Example: In a bank, the buying rate for the US dollar is 94 RUB, and the selling rate is 96 RUB. The difference (2 rubles) is the spread.

SWIFT

SWIFT is an international interbank financial messaging system that enables secure data exchange between banks worldwide and is used for international money transfers. See also SEPA

V

Volatility ↗ (Volatilität)

Volatility is the degree of fluctuation in an exchange rate or the price of a financial asset over a given period of time.
If a rate changes quickly and noticeably (for example, when the euro rises and falls against the US dollar), it is called high volatility. If the rate remains almost unchanged, volatility is low. The higher the volatility, the stronger the price swings — and the greater the investment risk.

W

World Bank ↗ (Weltbank)

World Bank is an international financial organization that provides developing countries with loans, grants, and advisory assistance to support economic growth and reduce poverty.

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Dictionary of currency terms & concepts