foreign exchange rate

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Foreign exchange rate

The rate of one currency unit expressed in terms of another.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Exchange Rate

The value of two currencies relative to each other. For example, on a given day, one may trade one U.S. dollar for a certain number of British pounds. A currency's exchange rates may be floating (that is, they may change from day to day) or they may be pegged to another currency. A floating exchange rate is dependent on the supply and demand of the involved currencies, as well as the amount of the currency held in foreign reserves. On the other hand, a government may peg its currency to a certain amount in another currency or currency basket. For example, the Qatari riyal has been worth 0.274725 dollars since 1980.

An advantage to a floating exchange rate is the fact that it tends to be more economically efficient. However, floating exchange rates tend to be more volatile, depending on the particular currency. Pegged exchange rates are generally more stable, but, since they are set by government fiat, they may take political rather than economic conditions into account. For example, some countries peg their exchange rates artificially low with respect to a major trading partner to make their exports to that partner artificially cheap. See also: Currency pair, Eurodollar.
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foreign exchange rate

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
However some empirical studies at international levels reported that foreign exchange rate fluctuations do not much affect the corporate firms.
From the above discussion it is clear that many of the studies in different countries are giving different evidences, some of them are supporting the use of hedging strategy FCD is negatively related to foreign exchange rate exposure.
Foreign exchange rate of INR versus USD is collected from Business Beacon database of CMIE.
First Stage: Estimation of Foreign Exchange Rate Exposure
"Past statistics show the economic conditions in our major export markets, such as Europe, China and the United States, matter more than the foreign exchange rate," he said, adding that the market is having a "schoolbook reaction" to the weak yen.
Yosano said foreign exchange rates are supposed to reflect economic fundamentals, but declined to comment on current dollar-yen exchange levels.
Japanese Finance Minister Sadakazu Tanigaki, who is on a visit to the United States, said Monday in New York that foreign exchange rates should steadily reflect economic fundamentals set by the Group of Seven industrialized countries.
2-3 in London that foreign exchange rates should reflect economic fundamentals and excess volatility and disorderly movements are undesirable for economic growth.
Declining to comment on the current dollar-yen exchange rates, Tanigaki told reporters that if foreign exchange rates are judged as not moving in line with economic fundamentals, Japan will ''take appropriate action at an appropriate time.''
The central bank of Canada is said to be considering changes to the foreign exchange rates that it posts.
''Volatility in foreign exchange rates affects corporate sentiment,'' Mizoguchi told reporters.
Mizoguchi declined to comment on specific foreign exchange rates. He also said Japan's position on currency policy was clarified in a statement adopted by the Group of Seven (G-7) finance leaders at their meeting in Boca Raton, Florida, in February.

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