Explain the bid—ask spread in the external currency market? What wi

Explain the bid—ask spread in the external currency market?

What will be an ideal response?

ANSWER

Answer: The bid-ask spread in the external currency market is the difference between the bid rate, which is the interest rate that the bank pays on its deposits and the ask rate, which is the interest rate that the bank charges on its loans. The market is very competitive, and the bid-ask spreads are small.