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What Is Foreign Exchange Rate?

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Tariq Habib Profile
Tariq Habib answered
Foreign trade involves the use of different national currencies. The relative price of two currencies is called the foreign exchange rate, which measures the price of 1 unit of domestic currency in terms of foreign currency. The foreign exchange rate is determined in the foreign exchange market, which is the market where different currencies are trade. For example, if the French franc sells at 5 francs to the U.S dollars, we say that the foreign exchange rate is 5 franc per dollar.    The foreign exchange rate is an important determinant of international trade because it has a large effect on the relative prices of the goods of different countries. To see how the foreign exchange rate affects foreign trade, take wine as an example. The relative prices of U.S wine and French wine will depend upon the domestic prices of the wines and upon the foreign exchange rate. Say that California Chardonnay wines sell for $6 per bottle, while the equivalent French Chardonnay sells for 40 French francs to the dollars, French wine sells at $4 per bottle while California wine sells at $6, giving an advantage to the imported variety.
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Marry George Profile
Marry George answered

The foreign exchange rate is the transformation rate of one money into another. This rate relies on the neighborhood interest for outside monetary forms and their nearby supply, nation's exchange adjust, quality of its economy, and such other factors. Nowadays many services available online to remain alert with the exchange rates.

Martin Garret Profile
Martin Garret answered

Thanks for this explanation for newbies. I am sure this is the necessary information for them. I would also tell about olymp trade demo account which is really good for young traders who only start their way in this sphere.

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