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

see EXCHANGE RATE.

rate of exchange

see EXCHANGE RATE.
References in periodicals archive ?
Net profit of US $571 million, expressed at constant rates of exchange, was 12% lower than in the corresponding period last year.
Net profit for the first nine months, expressed at constant rates of exchange, increased by 3%.
One task yet to be completed is development of software that will calculate rates of exchange as Canadian and American businesses barter across the border.
At the average rates of exchange for each period, net profit increased by 12% in dollars, 6% in guilders and by 10% in sterling over the corresponding period of last year.