The rate of a country's currency can be expressed as the rate of another country's currency known as currency exchange rates. The exchange rate of a currency will change constantly depends on exchange time of your travel money. Normally most of the business magazines publishing the exchange rate comparing with US dollar. Let us share one example to clear what are currency exchange rates. Assume that you are traveling from Egypt to USA. If you want to change EGP (Egyptian pounds) to US dollar, you will get 0.18 dollar for one Egyptian pound. Here transfer rate of EGP to USD is 0.18.
Exchange rates are categorized into two types.
- Fixed exchange rate and
- Floating exchange rate
The official exchange rate of a currency is known as fixed exchange rate. This exchange rate is managed by the government and its rate is also set by them. A central bank under the government maintains the local exchange rate on the international exchange market in response for the currency to which it is specified.
Private market determining the floating exchange rate through supply and demand. Floating exchange rate also known as self-correcting exchange rates and it changes the rate depends on deviations in supply and demand. Central bank should interfere in the private market only to ensure permanence and to keep off inflation.
4 comments:
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