Exchange rate

In finance, the exchange rate between two currencies specifies how much one currency is worth in terms of the other. For example an exchange rate of 120 Japanese yen (JPY, ¥) to the United States dollar (USD, $) means that JPY 120 is worth the same as USD 1. An exchange rate is also known as a foreign-exchange rate, forex rate or FX rate. The foreign exchange market is one of the largest markets in the world. By some estimates, about USD 2 trillion worth of currency changes hands every day.

Related Topics:
Finance - Currencies - Japanese yen - United States dollar - Foreign exchange market

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An exchange rate quotation is given by stating the number of units of a price currency that can be bought in terms of 1 unit currency. For example, in a quotation that says the EUR-USD exchange rate is 1.2 USD per EUR, the price currency is USD and the unit currency is EUR.

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Quotes using a country's home currency as the price currency are known as direct quotation or price quotation (from that country's perspective) (http://www.inlandrevenue.gov.uk/manuals/cfmmanual/cfm7011.htm) and are used by most countries.

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Quotes using a country's home currency as the unit currency are known as indirect quotation or quality terms quotation and are used in British newspapers and are also common in Australia, New Zealand and Canada.

Related Topics:
British - Australia - New Zealand - Canada

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• direct quotation: Home Currency / Foreign Currency
• indirect quotation: Foreign Currency / Home Currency

Note that, using direct quotation, if a unit currency is strengthening (i.e. appreciating, or becoming more valuable) then the exchange rate number increases. Conversely if the price currency is strengthening, the exchange rate number decreases and the unit currency is depreciating.

Related Topics:
Appreciating - Depreciating

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Exchange rate: Free or pegged ►