For example, in european countries the currency used is
called the  Euro(Eur) and in the United States
it is called the US Dollar(USD).A forex trade is to buy the Euro and at the
same time to sell USD. This is called going long on the EUR/USD.

The Mechanics Of Forex Trading is:

Forex trading is usually done with a broker or market
maker.Being  a forex trader you can
choose a currency pair that you think that it will change in value  and strike a deal as you fit.For example, if
you would have purchased  the sum of
1,000 Euros In january 2005 you would have paid for it 1,200 USD.During  2005 the Euro’s value against the U.S  value increased meaning that  at the end of the year with 1,000 Euros you
would have bought 1,300 U.S dollars rezulting in a 100$ gain.

Using a broker or a market maker a forex trader can place
orders very easily and then the broker
sends your order along a partner to Interbank Market to fill your
position.After you finish the trade the broker closes your  position in the Interbank Market and acredits
your account accordantly either gain or loss. These actions can take a few
seconds.

Of the total reserves, all components — foreign currency assets, gold, and SDR (special drawing rights) — fell $1.7 billion, $236 million, $23 million and $6 million, respectively, during the week. SDR is the reserve currency with IMF.

According to Ananth Narayan G, head of rates, foreign exchange and Credit, South Asia Financial Markets, Standard Chartered, a lot of it could be due to the revaluation effect. The dollar had strengthened substantially during the week against major global currencies, he said.

Almost 40 per cent of the reserves is believed to be in non-dollar assets, including the sterling pound, yen, euro and the yuan. Central banks do not disclose the currency composition in reserves.

A slice of the fall may be attributed to dollar outflows as well, thanks to selling by foreign portfolio managers in the last week of January, said a senior economist with a brokerage house.

Among other developments, the Centre has kept its WMA account with RBI vacant during the week ended January 29. While borrowings within the WMA ceiling is at the prevailing repo rate, there is a two per cent extra interest charged for borrowings above this limit. States, on the other hand, have hiked their outstanding WMA by Rs 630 crore to Rs 778 crore as on January 29.

“We have agreed that there is no reason to change what we said recently. We stick to what we said in Istanbul,” Jean-Claude Juncker said after a two-day G7 meeting concluded in Canada’s remote north.

The G7 was not expected to issue a communique on Saturday.

When the group met in Istanbul in October, it said in a communique that too much volatility in foreign exchange markets could hurt the global economy and the financial system, and it welcomed China’s pledge to move toward greater currency flexibility.

The United States, Canada, France and other countries have recently called on China to allow its currency to strengthen.