HOW FOREIGN EXCHANGE RATE IS DETERMINED | FOREIGN EXCHANGE | FUNCTIONS OF FOREIGN EXCHANGE
HOW FOREIGN EXCHANGE RATE IS DETERMINED The foreign exchange rate is the rate at which one currency can be changed into another currency . It is the price of one currency in relations of another currency . Foreign Exchange Markets The foreign exchange market is the market in which individuals’ firms and banks buy and sell foreign currencies for foreign exchange. Functions of the Foreign Exchange Market Foreign exchange market performs different functions. They are as follow; (1) Transfer of funds. (2) Credit functions. (3) Providence of facilities for hedging and speculation. Types of Exchange Rate: There are two types of exchange rates. They are as follows; (1) Fixed Exchange Rate Under fixed exchange rate all exchange transactions take place at an exchange rate that is determined by the monetary authorities. The establishments may fix the exchange rate by lawmaking or interference in currency bazaars. They may buy or sell currencies according...