Economy
Exchange Rate
Definition
The price at which one currency can be exchanged for another. Determines the international value of a nation's money.
Explanation
Exchange rates are either floating (determined by market forces, like USD/EUR) or fixed/pegged (set by the government, like the Saudi riyal). A strong currency makes imports cheaper but exports more expensive. Currency depreciation can boost exports but increases the cost of imported goods and foreign debt repayment. Major currency pairs include EUR/USD, USD/JPY, and GBP/USD.