Currency exchange rate is a ratio of calculation to find themonetary value of the currency of one country with the monetary value of another country’s currency. Alternatively, the currency can be defined as the rate at which one currency is exchanged for another.
In simple way, the rate at which one currency can be exchanged for another is called as currency exchange rate.
The fact The exchange rates differes among different country’s currencies. For example, the exchange rate between British pound and U.S. Dollar is different from the exchange rate between Euro and U.S. Dollar. A variey of factors are responsible for this difference of exchange rates among the currencies, although some exchange rates are fixed by exchange of promises.
The spot exchange rate refers to the current exchange rate. 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.
Exchange rate quotation An exchange rate quotation can be defined as the number of units of a price currency that can be purchase in terms of 1 unit currency. The quotation is of two types. Direct quotation and indirect quotation.
The currency exchange rate can be classified as nominal exchange rate and real exchange rate.
The nominal exchange rate can be defined as the rate at which an establishment will be able to business the currency of one nation for the currency of another. Whereas the real exchange rate consists of the terms price level of home country, exchange rate and foreign currency unit.
Need of exchanging currency People need to exchange the currency for various reasons. Some the the reasons are
When one goes abroad for study purpose: It is a frequent incidence that people are going abroad to finish their higher studies and to lead their daily life, they need money. But as countrywise, the price of the currency differs, so, one needs to exchage their currency. At the time of exchanging their currency, they need to take the exchange rates into account to achieve the best value for their money.
When one requires to send money abroad at regular intervals: It is a common scenario, if not frequent, that someone is sending money for their child or relatives temporarily residing abroad. In that case, they need to be cautious about the exchange rates of currency, so that they can be benefited most.
Advice by experts Experts recommends that while sending money for his child, or purchasing property in foreign land, one needs to count some factors which are responsible for changing of exchange rates. As currency exchange rates varies depending upon some factors, like time, so, one should always wait for the best time to choose for exchanging their currency.