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 ?
Small and medium businesses are the driving force of the economic growth in the EU and a fluctuating rate of exchange would smother them and would only benefit a few firms.
The author deals with two questions here; one, what adjustments in the rate of exchange are required to maintain external balance, given that internal balance is assured?
According to Governor Bogov, through the stability of the denar rate of exchange, the monetary authorities are also keeping price stability and, in order to help the private sector, the National Bank introduced unconventional measures last year whose effects are yet to be felt.
There is no threat for the stability of the denar rate of exchange.
The rate of exchange will be one DataWave share for one and one-half (11/2) Inprimis shares.
Asked whether the denar rate of exchange will change because of the reduced export of Macedonian products, Bogov said that the National Bank of Macedonia had retained the policy of a stable rate of exchange, which has yielded good results in keeping the macroeconomic stability in the past 15 years.