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Exchange rates displayed at Suvarnabhumi International Airport, Bangkok, Thai.
Mattes
Also Known As:
currency exchange rate
exchange rate, the price of a countryâs money in relation to another countryâs money. An exchange rate is âfixedâ when countries use gold or another agreed-upon standard, and each currency is worth a specific measure of the metal or other standard. An exchange rate is âfloatingâ when supply and demand or speculation sets exchange rates (conversion units). If a country imports large quantities of goods, the demand will push up the exchange rate for that country, making the imported goods more expensive to buyers in that country. As the goods become more expensive, demand drops, and that countryâs money becomes cheaper in relation to other countriesâ money. Then the countryâs goods become cheaper to buyers abroad, demand rises, and exports from the country increase.
World trade now depends on a managed floating exchange system. Governments act to stabilize their countriesâ exchange rates by limiting imports, stimulating exports, or devaluing currencies.
