Foreign exchange trading refers to trading one country’s money for that of
another country. The need for such trade arises because of tourism, the
buying and selling of goods internationally, or investment occurring across
international boundaries. The kind of money specifically traded takes the
form of bank deposits or bank transfers of deposits denominated in foreign
currency. The foreign exchange market, as we usually think of it, refers to
large commercial banks in financial centers, such as New York or London,
that trade foreign-currency-denominated deposits with each other. Actual
bank notes like dollar bills are relatively unimportant insofar as they rarely
physically cross international borders. In general, only tourism or illegal
activities would lead to the international movement of bank notes.