Exchange Rate

Posted in Finance, Accounting and Economics Terms, Total Reads: 1986

Definition: Exchange Rate

Exchange rate, also referred as conversion rate, is the amount of one currency exchanged for another.It is one currency expressed in terms of another currency.

 For example 50 Rupees for 1 USD means that 50 Rupees need to be exchanged to get 1 U.S. dollar. Or if the U.S dollar exchange rate for Rupee is defined as 1:50, 1 USD needs to be exchanged for 50 Rupees.

Exchange rates can be fixed or floating. In a fixed exchange rate system, the government of the country (or the Central Bank) intervenes to keep the exchange rate pegged at a particular rate. However, most countries today have a floating rate system where the exchange rate is determined by the buying and selling in the foreign exchange market. For example the exchange rate of Rupee for dollar continuously dwindles and is not fixed at a particular rate.

Exchange rate shows how one currency is valued with respect to another currency.


Hence, this concludes the definition of Exchange Rate along with its overview.

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