Exchange rate – definition

An exchange rate is the price of one currency expressed in terms of another currency, or against a basket of other currencies. In a floating exchange rate regime rates are determined by the forces of demand and supply in the foreign exchange market.

exchange rate influences

However, exchange rates may be pegged against another currency, or fixed to the value of gold. In which case the rate will be predetermined for a period of time, rather than constantly fluctuating over time.

Types of exchange rate

exchange rate types