Simple Definition of Exchange Rate
- An exchange rate is the value of a country's currency vs. that of another country or economic zone.
- Most exchange rates are free-floating and will rise or fall based on supply and demand in the market.
- Some exchange rates are not free-floating and are pegged to the value of other currencies and may have restrictions.
Understanding Exchange Rate
- Typically, an exchange rate is quoted using an acronym for the national currency it represents.