An exchange rate is the rate at which one currency can be exchanged for another. It is the price at which one can purchase that currency. If you are going to a country you will need to familiarize yourself with the current currency exchange rates so that you can pay for goods and services within that country.
There are two ways in which the value of a currency can be measured against another:
HOW EXCHANGE RATE IS DETERMINED
1. Fixed current currency exchange rate-This level is fixed by the country’s central bank and maintained as the official exchange rate. The rate is usually pegged to the US dollar or other world’s major currencies such as the euro, yen or sterling pound.
2. Floating current currency exchange rate-The rate of the currency is determined by the forces of supply and demand.
In reality however the exchange rate is a compromise between the above two methods.
CURRENT FOREIGN EXCHANGE RATES
The foreign exchange market is where the buying and selling of currencies takes place and so one will have to become familiar with the current foreign exchange rates in order to trade profitably.
Though the US dollar is the pre-eminent world currency it is experiencing competition from euro, yen and Canadian dollar. This has been precipitated by the current financial meltdown and the declining US economy. Ultimately there has been a surge in the value of gold due to inconsistencies of the current dollar exchange rate. Currently the euro is bullish leading to enthusiasm by international investors as well as the forex traders over the current euro exchange rate.
