What Is the Exchange Rate?

Exchange rate - the price of the currency of the country, as expressed in the currency of another country or international currency counting units.

The exchange rate is needed to determine the proportions of foreign exchange in international trade in goods and services, the movement of capital in the form of investments and loans, to compare prices on world commodity markets and the cost parameters of different countries, revaluation of foreign currency accounts of companies, banks, governments and individuals.

The basis of the exchange rate, especially in fixed mode, is the currency parity - the ratio between two currencies, to be ascertained by law. Currently, the parities are used extensively in the EMU.

When gold standard was the basis of the exchange rate parity of gold, that is, the ratio of the two currencies weighted content gold’s. Na practice rates only occasionally and very briefly may vary from parity - in the equilibrium of supply and demand.

Foreign exchange rates under the gold standard could deviate from parity only in the "gold points", that is ± 1% in either direction, as the sum of all costs of shipping gold did not exceed 1% of its value. With the demonetization of gold, the new standard values ​​of currencies are the SDR. Now the exchange rate does not depend on the gold content, but from a number of factors.

Exchange rates can be set at different levels depending on how the sale of foreign currency, the latter is: cash, bank transfer, wholesale, Banknote, e-mail. At the same time buying and selling rate of exchange will always differ on the size of the bank margin (including the costs, risks and profits of the bank).

The degree of convertibility of the currency and the level of the exchange rate, foreign exchange and other parameters are defined in the foreign exchange market.
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