Quick Definition

An exchange rate is the value of one currency for the purpose of conversion to another. It indicates how much one currency is worth in terms of another.

Examples

• 1When traveling from the US to Europe, you might exchange USD for EUR at the current exchange rate.
• 2A business importing goods from Japan to Canada needs to pay in JPY, requiring conversion from CAD based on the exchange rate.
• 3Investors trading in foreign exchange markets buy and sell currencies, profiting from fluctuations in exchange rates.
• 4A company paying overseas employees will use the exchange rate to determine the local currency equivalent of their salaries.

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