what is meant by foreign exchange rate?

[dimpy.handa]

meaning of foreign exchange rateis the price of one currency in terms of an other is knowns as foreign exchange rate. it is the rate at which one unit of a foreign currency is exchanged for domestic currency. since there is symmetry between two currencies, exchange rate can be quoted in two ways i.e. foreign currency expressed in terms of domestic currency or domestic currency expressed in terms of foreign currency.

 

[swatiraohnlu]

The exchange rate expresses the national currency's quotation in respect to foreign ones. For example, if one US dollar is worth 10 000 Japanese Yen, then the exchange rate of dollar is 10 000 Yen. If something costs 30 000 Yen, it automatically costs 3 US dollars as a matter of accountancy. Going on with fictious numbers, a Japan GDP of 8 million Yen would then be worth 800 Dollars.

Thus, the exchange rate is a conversion factor, a multiplier or a ratio, depending on the direction of conversion.

In a slightly different perspective, the exchange rate is a price. If the exchange rate can freely move, the exchange rate may turn out to be the fastest moving price in the economy, bringing together all the foreign goods with it.