Exchange rate

exchange ratesreal exchange rateforeign exchange rateforeign exchangecurrency exchange ratecurrency exchangesexchange-raterate of exchangecurrency conversionmarket exchange rate
In finance, an exchange rate is the rate at which one currency will be exchanged for another.wikipedia
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Foreign exchange market

foreign exchangeforexcurrency exchange
Exchange rates are determined in the foreign exchange market, which is open to a wide range of different types of buyers and sellers, and where currency trading is continuous: 24 hours a day except weekends, i.e. trading from 20:15 GMT on Sunday until 22:00 GMT Friday.
This market determines the foreign exchange rate.

Japanese yen

¥yenJPY
For example, an interbank exchange rate of 114 Japanese yen to the United States dollar means that ¥114 will be exchanged for each US$1 or that US$1 will be exchanged for each ¥114.
To stabilize the Japanese economy the exchange rate of the yen was fixed at ¥360 per $1 as part of the Bretton Woods system.

Forward exchange rate

forward premiumforwardforward exchange rate premium
The forward exchange rate refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.
The forward exchange rate (also referred to as forward rate or forward price) is the exchange rate at which a bank agrees to exchange one currency for another at a future date when it enters into a forward contract with an investor.

Foreign exchange spot

spot exchange ratespotFX spot
The spot exchange rate refers to the current exchange rate.
The exchange rate at which the transaction is done is called the spot exchange rate. As of 2010, the average daily turnover of global FX spot transactions reached nearly 1.5 trillion USD, counting 37.4% of all foreign exchange transactions.

Bretton Woods system

Bretton WoodsBretton Woods AgreementBretton Woods institutions
For example, between 1994 and 2005, the Chinese yuan renminbi (RMB) was pegged to the United States dollar at RMB 8.2768 to $1. China was not the only country to do this; from the end of World War II until 1967, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.
The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained its external exchange rates within 1 percent by tying its currency to gold and the ability of the IMF to bridge temporary imbalances of payments.

Currency appreciation and depreciation

depreciationappreciationdepreciate
Using direct quotation, if the home currency is strengthening (that is, appreciating, or becoming more valuable) then the exchange rate number decreases.
Short-term changes in the value of a currency is reflected in changes in the exchange rate.

Percentage in point

pippips
(The fourth decimal place is usually referred to as a "pip").
In finance, specifically in foreign exchange markets, a percentage in point or price interest point (pip) is a unit of change in an exchange rate of a currency pair.

Fixed exchange-rate system

fixed exchange ratepeggedfixed
A movable or adjustable peg system is a system of fixed exchange rates, but with a provision for the revaluation (usually devaluation) of a currency.
The gold standard or gold exchange standard of fixed exchange rates prevailed from about 1870 to 1914, before which many countries followed bimetallism.

Monetary policy

monetarymonetary policiesunconventional monetary policy
4) Fiscal and monetary policy: Although the influence of monetary policy on the exchange rate changes of a country’s government is indirect, it is also very important.In general, the huge fiscal revenue and expenditure deficit caused by expansionary fiscal and monetary policies and inflation will devalue the domestic currency. The tightening fiscal and monetary policies will reduce fiscal expenditures, stabilize the currency, and increase the value of the domestic currency.
Further goals of a monetary policy are usually to contribute to the stability of gross domestic product, to achieve and maintain low unemployment, and to maintain predictable exchange rates with other currencies.

Central bank

central bankscentral bankingcentral banking system
Central banks typically have little difficulty adjusting the available money supply to accommodate changes in the demand for money due to business transactions. A country may gain an advantage in international trade if it controls the market for its currency to keep its value low, typically by the national central bank engaging in open market operations in the foreign exchange market.
setting the official interest rate – used to manage both inflation and the country's exchange rate – and ensuring that this rate takes effect via a variety of policy mechanisms

United Kingdom

British🇬🇧UK
Quotation using a country's home currency as the unit currency (for example, USD 1.11 = EUR 1.00 in the Eurozone) is known as indirect quotation or quantity quotation and is used in British newspapers ; it is also common in Australia, New Zealand and the Eurozone.
Based on market exchange rates, the UK is today the fifth-largest economy in the world and the second-largest in Europe after Germany.

List of renminbi exchange rates

average CNY exchange rateChinese yuan renminbiList of CNY exchange rates
For example, between 1994 and 2005, the Chinese yuan renminbi (RMB) was pegged to the United States dollar at RMB 8.2768 to $1. China was not the only country to do this; from the end of World War II until 1967, Western European countries all maintained fixed exchange rates with the US dollar based on the Bretton Woods system.
Although it is not a freely convertible currency, and has an official exchange rate, the CNY plays an important role in the world economy and international trade.

Maritime transport

shippingmerchant shippingwater transport
For carrier companies shipping goods from one nation to another, exchange rates can often impact them severely.
Transport by water is cheaper than transport by air, despite fluctuating exchange rates and a fee placed on top of freighting charges for carrier companies known as the currency adjustment factor (CAF).

Balance of payments

balance of paymentbalance-of-paymentsimbalances of payments
1) Balance of payments: When a country has a large international balance of payments deficit or trade deficit, it means that its foreign exchange earnings are less than foreign exchange expenditures and its demand for foreign exchange exceeds its supply, so its foreign exchange rate rises, and its currency depreciates.
Under a fixed exchange rate system, the central bank accommodates those flows by buying up any net inflow of funds into the country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's currency and other currencies.

Purchasing power parity

PPPPPSGDP (PPP)
If all goods were freely tradable, and foreign and domestic residents purchased identical baskets of goods, purchasing power parity (PPP) would hold for the exchange rate and GDP deflators (price levels) of the two countries, and the real exchange rate would always equal 1.
Observed deviations of the exchange rate from purchasing power parity are measured by deviations of the real exchange rate from its PPP value.

Interest rate parity

uncovered interest rate parityCovered interest rate parityuncovered interest parity
Uncovered interest rate parity (UIRP) states that an appreciation or depreciation of one currency against another currency might be neutralized by a change in the interest rate differential.
Given foreign exchange market equilibrium, the interest rate parity condition implies that the expected return on domestic assets will equal the exchange rate-adjusted expected return on foreign currency assets.

Euro

EUReuros
For example, the purchasing power of the US dollar relative to that of the euro is the dollar price of a euro (dollars per euro) times the euro price of one unit of the market basket (euros/goods unit) divided by the dollar price of the market basket (dollars per goods unit), and hence is dimensionless.
The definitive values of one euro in terms of the exchange rates at which the currency entered the euro are shown on the right.

Trade-weighted effective exchange rate index

trade weighted indexeffective exchange rateeffective exchange rates
Bilateral exchange rate involves a currency pair, while an effective exchange rate is a weighted average of a basket of foreign currencies, and it can be viewed as an overall measure of the country's external competitiveness.
The trade-weighted effective exchange rate index is an economic indicator for comparing the exchange rate of a country against those of their major trading partners.

Foreign exchange option

foreign currency optionsforeign exchangeFX
Currencies can be traded at spot and foreign exchange options markets.
In finance, a foreign exchange option (commonly shortened to just FX option or currency option) is a derivative financial instrument that gives the right but not the obligation to exchange money denominated in one currency into another currency at a pre-agreed exchange rate on a specified date.

Foreign-exchange reserves

foreign exchange reservesforeign exchangeforeign reserves
A nation with a trade deficit will experience a reduction in its foreign exchange reserves, which ultimately lowers (depreciates) the value of its currency.
Thus, the quantity of foreign exchange reserves can change as a central bank implements monetary policy, but this dynamic should be analyzed generally in the context of the level of capital mobility, the exchange rate regime and other factors.

Arbitrage

regulatory arbitragearbitrage-freearbitrageur
If US interest rates increase while Japanese interest rates remain unchanged then the US dollar should depreciate against the Japanese yen by an amount that prevents arbitrage (in reality the opposite, appreciation, quite frequently happens in the short-term, as explained below).
As a result of arbitrage, the currency exchange rates, the price of commodities, and the price of securities in different markets tend to converge.

Open market operation

open market operationsopen-market operationsbuying operations
A country may gain an advantage in international trade if it controls the market for its currency to keep its value low, typically by the national central bank engaging in open market operations in the foreign exchange market.
Monetary targets, such as inflation, interest rates, or exchange rates, are used to guide this implementation.

Tables of historical exchange rates to the United States dollar

2006 exchange ratesabout US$1,000 at the timeexchange variation rate
Tables of historical exchange rates to the USD
An exchange rate represents the value of one currency in another.

Inflation

inflation rateprice inflationfood inflation
; Whether inflation is included:
Where fixed exchange rates are imposed, higher inflation in one economy than another will cause the first economy's exports to become more expensive and affect the balance of trade.

Renminbi

yuan¥RMB
In the early twenty-first century it was widely asserted that the People's Republic of China had been doing this over a long period of time.
The unrealistic levels at which exchange rates were pegged led to a strong black market in currency transactions.