In the retail currency exchange market, different buying and selling rates will be quoted by money dealers. The spot exchange rate is the current exchange rate, while the forward exchange rate is an exchange rate that is quoted and traded today but for delivery and payment on a specific future date. trading from 20:15 GMT on Sunday until 22:00 GMT Friday). In floating exchange rate regimes, 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. Rather, national exchange rate regimes reflect political considerations. There is no agreement in the economic literature on the optimal national exchange rate policy (unlike on the subject of trade where free trade is considered optimal). Countries can also have a strong or weak currency.

Governments can impose certain limits and controls on exchange rates. For example, a currency may be floating, pegged (fixed), or a hybrid. In this case it is said that the price of a dollar in relation to yen is ¥131, or equivalently that the price of a yen in relation to dollars is $1/131.Įach country determines the exchange rate regime that will apply to its currency. For example, an interbank exchange rate of 131 Japanese yen to the United States dollar means that ¥131 will be exchanged for US$1 or that US$1 will be exchanged for ¥131. The exchange rate is also regarded as the value of one country's currency in relation to another currency. Currencies are most commonly national currencies, but may be sub-national as in the case of Hong Kong or supra-national as in the case of the euro. In finance, an exchange rate is the rate at which one currency will be exchanged for another currency.

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