What Is The Difference Between The Interest Rate And The Exchange Rate?


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amber Jhon Profile
amber Jhon answered
Basically exchange rate is the Forex rate that tells the conversion rate of one currency into another currency. In other words it tells about how much is the worth of one currency in terms of another one. For example what is the worth of Pounds against dollars or vice versa. However interest rate is the fee or the charges which have to be paid as cost of capital like on assents lent, finance leases etc. It has nothing to do with the currency rate.

Moreover, The Foreign Exchange Market in the world is responsible for trading these currency conversions. While for interest rates, there are open markets where people invests and these market rates determines the interest rates.

Exchange rates are for a very brief time period and can change within minutes however, interest rates are for relatively longer periods.
Moe Pence Profile
Moe Pence answered
The exchange rates (also known as Foreign Exchange Rates) between two different currencies specifies how much one currency is worth in terms of the other. (an exchange rate of 102 Japanese Yen to the U.S Dollar means that Japanese 102 is worth the same as US 1).  The exchange rate depends a lot on the size of the current interest rates (inflation and deflation of the dollar).  Interest rates are the percentages of extra monies that you pay on loans, and also the amount of monies that a bank pays out depending on how much money you have in a savings account.      

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