Rate at which one currency will be exchanged for another
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Foreign exchange
Exchange rates
Currency band
Exchange rate
Exchange rate regime
Exchange-rate flexibility
Dollarization
Fixed exchange rate
Floating exchange rate
Linked exchange rate
Managed float regime
Dual exchange rate
Markets
Foreign exchange market
Futures exchange
Retail foreign exchange trading
Assets
Currency
Currency future
Currency forward
Non-deliverable forward
Foreign exchange swap
Currency swap
Foreign exchange option
Historical agreements
Bretton Woods Conference
Smithsonian Agreement
Plaza Accord
Louvre Accord
See also
Bureau de change
Hard currency
Currency pair
Foreign exchange fraud
Currency intervention
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In finance, an exchange rate is the rate at which one currency will be exchanged for another currency.[1] Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of the euro.[2]
The exchange rate is also regarded as the value of one country's currency in relation to another currency.[3] For example, an interbank exchange rate of 141 Japanese yen to the United States dollar means that ¥141 will be exchanged for US$1 or that US$1 will be exchanged for ¥141. In this case it is said that the price of a dollar in relation to yen is ¥141, or equivalently that the price of a yen in relation to dollars is $1/141.
Each country determines the exchange rate regime that will apply to its currency. For example, a currency may be floating, pegged (fixed), or a hybrid.[4] Governments can impose certain limits and controls on exchange rates. Countries can also have a strong or weak currency.[4] There is no agreement in the economic literature on the optimal national exchange rate policy (unlike on the subject of trade where free trade is considered optimal).[5] Rather, national exchange rate regimes reflect political considerations.[5]
In floating exchange rate regimes, exchange rates are determined in the foreign exchange market,[6] which is open to a wide range of different types of buyers and sellers, and where currency trading is continuous: 24 hours a day except weekends (i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday). The spot exchange rate is the current exchange rate, while the forward exchange rate is an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.
In the retail currency exchange market, different buying and selling rates will be quoted by money dealers. Most trades are to or from the local currency. The buying rate is the rate at which money dealers will buy foreign currency, and the selling rate is the rate at which they will sell that currency. The quoted rates will incorporate an allowance for a dealer's margin (or profit) in trading, or else the margin may be recovered in the form of a commission or in some other way. Different rates may also be quoted for cash, a documentary transaction or for electronic transfers. The higher rate on documentary transactions has been justified as compensating for the additional time and cost of clearing the document. On the other hand, cash is available for resale immediately, but incurs security, storage, and transportation costs, and the cost of tying up capital in a stock of banknotes (bills).
^Frieden, Jeffry A.; Lake, David A.; Schultz, Kenneth A. (2019). World politics: interests, interactions, institutions (4th ed.). New York: W.W. Norton & Company. p. 395. ISBN 978-0-393-64449-4.
^Frieden, Jeffry A.; Lake, David A.; Schultz, Kenneth A. (2019). World politics: interests, interactions, institutions (4th ed.). New York: W.W. Norton & Company. pp. 394–395. ISBN 978-0-393-64449-4.
^O'Sullivan, Arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Prentice Hall. p. 458. ISBN 0-13-063085-3. Archived from the original on 2016-12-20. Retrieved 2020-12-02.{{cite book}}: CS1 maint: location (link)
^ abFrieden, Jeffry A.; Lake, David A.; Schultz, Kenneth A. (2019). World politics: interests, interactions, institutions (4th ed.). New York: W.W. Norton & Company. pp. 391–395. ISBN 978-0-393-64449-4.
^ abBroz, J. Lawrence; Frieden, Jeffry A. (2001). "The Political Economy of International Monetary Relations". Annual Review of Political Science. 4 (1): 317–343. doi:10.1146/annurev.polisci.4.1.317. ISSN 1094-2939.
^The Economist – Guide to the Financial Markets (pdf)
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An exchangerate regime is a way a monetary authority of a country or currency union manages the currency about other currencies and the foreign exchange...
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Sweden Andorra Monaco San Marino Vatican City Kos. Mont. The European ExchangeRate Mechanism (ERM II) is a system introduced by the European Economic Community...
one exchangerate for specific transactions involving foreign exchange and another exchangerate governing other transactions. A dual exchangerate policy...
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available to balance payments of the country, influence the foreign exchangerate of its currency, and to maintain confidence in financial markets. Reserves...
stable rate of inflation). Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchangerates with...
industry. It has previously been claimed that the renminbi's official exchangerate was undervalued by as much as 37.5% against its purchasing power parity...
lost much of its prewar value. To stabilize the Japanese economy, the exchangerate of the yen was fixed at ¥360 per US$ as part of the Bretton Woods system...
exchangerate currencies, with corresponding reference currencies and exchangerates. 1.^ Approximate. List of circulating currencies Fixed exchange rate...
historical exchangerate of the different currencies of Argentina, expressed in Argentine currency units per United States dollar. The exchangerate at the...
was $18.9 billion, exchangerate of 1 USD = 0.9696 EUR used here for 2022 season. Cited revenue was $11.6 billion, exchangerate of 1 USD = 0.9758 EUR...
for settlement on the spot date. The exchangerate at which the transaction is done is called the spot exchangerate. As of 2010, the average daily turnover...
proverbs: In 1932, the rial was pegged to sterling at a rate of £1 = Rls 59.75. The exchangerate was £1 = Rls 80.25 in 1936, £1 = Rls 64.350 in 1939, £1...
1717 when Sir Isaac Newton, then-master of the Royal Mint, set the exchangerate of silver to gold too low, thus causing silver coins to go out of circulation...
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Many stocks on the London Stock Exchange are quoted in penny sterling, using the unofficial code "GBX". The exchangerate of sterling against the US dollar...
decontrol era from 1962 to 1970 where foreign exchange restrictions were dismantled and a new free-market exchangerate of ₱3.90 per dollar was adopted since...