Exchange rate

Exchange Rate

The exchange rate represents the value of one currency compared to another. This value is expressed in the form of a ratio or proportion. The exchange rate determines the price of a currency in terms of another currency. It plays a crucial role in international trade and investment.

The exchange rate is affected by various factors, such as inflation rates, political stability, economic growth, and monetary policies. Changes in the exchange rate can impact the cost of exporting and importing goods and services. Also, fluctuations in the exchange rate affect the purchasing power of individuals and businesses, and can have a considerable impact on the global economy.

Governments and central banks often intervene to manage exchange rates, using tools such as foreign exchange reserves, interest rates, and capital controls. This intervention can be aimed at maintaining stability in the exchange rate, promoting competitiveness, or addressing economic imbalances.

In summary, the exchange rate is a crucial financial indicator that reflects the value of one currency compared to another. It is vital to understand the factors that influence exchange rates and their implications for the global economy.