Understanding FX rates

In the history of trade and commerce, exchange FX rates are relatively new phenomena. From the classic olden days, through out the countries of Europe and eastern Mediterranean, precious metals, like the gold and silver were a common medium of exchange. For example, in the 14th century, English merchants used to sell wool to Flanders, and on exchange of wool, they used to get gold and silver coins. Although in various parts of Europe, baffling variety of coins was in circulation. On the other hand, someone on the lookout for selling dollar and buying sterling will expect sterling to weaken against the dollar. Then in terms of sterling value of US dollar will become more if he or she holds. The FX market is one of the largest markets in the world. On an estimate, every day worth 2 trillion USD currency changes hands. In some cases, the exchange rate is quoted and traded today, but the delivery and payments were made on another specific future date. These are referred as Forward exchange. The FX rate of various currencies is decided on the basis of social, economic, and government policies of their countries.