"In finance, an exchange rate is the rate at which one currency will be exchanged for another currency."
The value of one currency in relation to another currency and how it affects international trade and investment.
Foreign exchange market: This is a market where currencies are traded between different countries.
Exchange rate regimes: This refers to the different types of exchange rate systems that exist, such as fixed exchange rates, floating exchange rates, and managed exchange rates.
Balance of payments: This is a record of all the transactions that take place between one country and all other countries during a given period of time.
International capital flows: This refers to the movement of investments and capital between different countries.
Purchasing power parity: A theory that states that the exchange rate between two currencies should be equal to the ratio of the price levels of each country’s goods and services.
Interest rate parity: A theory that suggests that the difference in interest rates between two countries should be equal to the expected change in their exchange rate.
Exchange rate volatility: This refers to the extent to which exchange rates fluctuate over time.
Exchange rate forecasting: This refers to the use of various tools and techniques to predict changes in exchange rates.
Exchange rate risk management: This refers to the strategies and tactics that individuals and firms can use to protect themselves from adverse changes in exchange rates.
The effects of exchange rates on international trade and investment: This topic explores how changes in exchange rates can have an impact on the volume and patterns of international trade and investment.
Spot exchange rate: The spot exchange rate is the current exchange rate at which a currency can be bought or sold for immediate delivery.
Forward exchange rate: A forward exchange rate is an agreed upon exchange rate for the future delivery of a currency. It is often used to hedge against future currency risk.
Cross exchange rate: A cross currency exchange rate quotes the value of one currency in terms of another currency that is neither the base nor the counter currency.
Nominal exchange rate: The nominal exchange rate is the rate at which two currencies are exchanged without considering any inflation rate differences between them.
Real exchange rate: The real exchange rate is the nominal exchange rate adjusted for inflation.
Effective exchange rate: The effective exchange rate is a weighted average of a country's exchange rate against a basket of other currencies. It reflects a country's overall currency strength.
Fixed exchange rate: A fixed exchange rate is a system in which a country's currency is pegged to another currency or a commodity. It is often used to maintain stability in the currency market.
Floating exchange rate: A floating exchange rate is a system in which a currency's value is determined by the demand and supply of the currency in the foreign exchange market. The exchange rate is allowed to fluctuate based on market forces.
Managed floating exchange rate: A managed floating exchange rate is a system in which a country's central bank intervenes in the currency market to influence the exchange rate. It allows the exchange rate to float but with some intervention from the central bank.
Crawling peg exchange rate: A crawling peg exchange rate is a system in which a country's currency is slowly adjusted over time to follow a fixed exchange rate against another currency or a basket of currencies.
"Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of the euro."
"The exchange rate is also regarded as the value of one country's currency in relation to another currency."
"For example, an interbank exchange rate of 131 Japanese yen to the United States dollar means that ¥131 will be exchanged for US$1 or that US$1 will be exchanged for ¥131."
"In this case, it is said that the price of a dollar in relation to yen is ¥131, or equivalently that the price of a yen in relation to dollars is $1/131."
"Each country determines the exchange rate regime that will apply to its currency."
"For example, a currency may be floating, pegged (fixed), or a hybrid."
"Governments can impose certain limits and controls on exchange rates."
"Countries can also have a strong or weak currency."
"There is no agreement in the economic literature on the optimal national exchange rate policy."
"In floating exchange rate regimes, exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers."
"The spot exchange rate is the current exchange rate, while the forward exchange rate is an exchange rate that is quoted and traded today but for delivery and payment on a specific future date."
"The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell that currency."
"The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading."
"...or else the margin may be recovered in the form of a commission or in some other way."
"Different rates may also be quoted for cash, a documentary transaction, or for electronic transfers."
"The higher rate on documentary transactions has been justified as compensating for the additional time and cost of clearing the document."
"On the other hand, cash is available for resale immediately, but incurs security, storage, and transportation costs."
"the cost of tying up capital in a stock of banknotes (bills)."
"24 hours a day except weekends (i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday)."