Exchange rate

An exchange rate is the price of one currency expressed in units of another. It may be quoted directly or indirectly and can be fixed or market-determined.

Currency pair: A quotation showing the value of one currency in units of another. Exchange rates are commonly quoted as pairs, such as EUR/USD.
Fixed exchange rate: An exchange rate a government or central bank maintains at a target value. It contrasts with rates allowed to move freely in response to trading.
Currency conversion: The calculation of an amount’s value in another currency using an exchange rate. It turns a quoted rate into the value of a particular payment or balance.
Currency depreciation: A decline in a currency’s value relative to another currency under a floating or market-driven rate. Depreciation makes foreign currencies cost more in domestic-currency terms.
Gold standard: A monetary system in which currency values are defined by a fixed quantity of gold. Gold convertibility once anchored exchange rates between participating currencies.
Bid–ask spread: The difference between the price at which a dealer buys an asset and the price at which it sells. Currency dealers quote buying and selling rates rather than one identical price.
Floating exchange rate: An exchange rate determined primarily by supply and demand in currency markets. It contrasts with a rate held near a government-set target.
Foreign exchange risk: The possibility that currency movements will change the value of an asset, liability, or cash flow. Changing rates can alter the domestic-currency value of cross-border obligations.
Currency appreciation: An increase in a currency’s value relative to another currency under a floating or market-driven rate. Appreciation makes foreign currencies cheaper in domestic-currency terms.
Bretton Woods system: The postwar monetary system of fixed but adjustable exchange rates centered on the U.S. dollar. Its collapse helped usher in widespread floating exchange rates.

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