What Is Foreign Exchange, Why Is Is Used And How Important Is It?

Foreign exchange is merely the procedure of exchanging between one currency and another. It is a practice which Banks occupy themselves with, including central banks of countries who need to hold a certain amount of foreign currency to guarantee imports into the country.
Many people when they go on holiday, first go into the bank and  buy some foreign currency (or money )to use while they are on holiday in another country, then when they return, they exchange it back into their own currency again.The bank makes a profit both in selling, and buying. Money change businesses do this in tourist towns too.
Banks and investment houses can also trade currencies, trying to anticipate the rises and falls in different currencies, the goal is to buy on the up, and sell before the drop in value. These values change hourly, and daily, and are what you see reported on the news.