Forex Bible
Exchange rate

The exchange rate is the relative price of a currency against another one. An exchange rate of 1.4500 EUR/USD means that one euro can be exchanged against 1.4500 American Dollar. Each currency is represented by its ISO code, a three-letter abbreviation (EUR for the Euro, USD for the US Dollar, JPY for the Yen, GBP for the Sterling Pound, CHF for the Swiss Franc…).
The expression “conversion rate” is a synonym of “exchange rate” unlike the parity of a currency which is a different notion.
The floating exchange rate constantly fluctuates and is determined by the offer and supply of the two currencies on the exchange market (if the demand is superior to the supply, the rate increases). The exchange rate can also be fixed; in this case it represents a constant rate against a reference currency (in general the US Dollar).
The exchange rate can be listed in two ways : direct or variable
- The direct exchange rate represents the number of unities of foreign currencies that we can have with one unity of the national currency. For example the price of the Euro in Dollar: 1 EUR = 1.47 USD
- The variable exchange rate represents the number of unities of a national currency that we have to give to obtain one unity of a foreign currency. For example the price of the Dollar in Euro: 1 USD = 0.68 EUR
At the heart of the exchange rate...
The Euro has been directly listed since the day it was launched on January 1, 1999. Before, the European currencies had variable quotations.
Exchange rate
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