Introduction to Exchange Rates

By Jodi Beggs, About.com Guide

These currency prices are referred to as exchange rates. More specifically, these prices are nominal exchange rates (not to be confused with real exchange rates). Just as the price of a good or service can be given in dollars, in Euro, or in any other currency, an exchange rate for a currency can be stated relative to any other currency. You can see a variety of such exchange rates by going to various finance web sites.

A US Dollar/Euro (USD/EUR) exchange rate, for example, gives the number of US dollars than can be bought with one Euro, or the number of US dollars per Euro. In this way, exchange rates have a numerator and a denominator, and the exchange rate represents how much numerator currency can be exchanged for one unit of denominator currency.

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• The Importance of Currency Markets
• Exchange Rates
• Appreciation and Deprecation
• Exchange Rates as Reciprocals

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