An exchange rate is the value of one nation’s currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro? As of July 31, 2020, the exchange rate is 1.18, meaning it takes $1.18 to buy €1.
KEY TAKEAWAYS
- An exchange rate is the value of a country’s currency vs. that of another country or economic zone.
- Most exchange rates are free-floating and will rise or fall based on supply and demand in the market.
- Some currencies are not free-floating and have restrictions.