Exchange Rate

What is an Exchange Rate?

An exchange rate is simply the price of one currency denominated in another. It is always expressed as a currency pair. For example, the price of 1 Euro in US Dollars would be written as EUR/USD and would take a value of something like 1.4, which would mean it costs $1.4 to buy €1.

Exchange rates can appreciate or depreciate, but the movement in the currency pair is counterintuitive. If the US dollar depreciates against the British pound, GBP/USD will go UP because 1 pound buys more dollars (and 1 dollar buys less pounds).

Exchange rates are affected by a vast amount of factors including politics, war, economics, sentiment and more.

 

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