rate of exchange

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Rate of exchange

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.

rate of exchange


rate of exchange

References in periodicals archive ?
Businessmen from the Economic Chamber appealed at a debate for a fluctuating rate of exchange for more money for investments and economic growth and development.
A low rate of exchange is the mother of all evil both in exports and in imports, Caglayan said.
In the last chapter, "Continuous Adjustments", the author applies the method of comparative statics to continuous changes in an attempt to answer the question of what tendencies in the balance of payments of a country may result from growth, and their impact on rate of exchange.
But at the bank they told me the rate of exchange was less for Scottish notes.
Payments from the United Kingdom will be made in Sterling at the rate of exchange ruling on October 1, 1999, or the first day thereafter on which a rate of exchange is available.
The denar is not going to depreciate and the monetary policy is going to continue defending the stability of its rate of exchange against the euro, said National Bank Governor Dimitar Bogov at the debate marking the 21st anniversary of the introduction of the national currency.
The pegging of the Chinese currency, the yuan, to a fixed rate of exchange with the U.