The rate or exchange rate

The rate or exchange rate between two currencies is the rate or proportional relationship between the value of one and the other. This rate is an indicator showing how many units of one currency needed to obtain one unit of the other.

For example, if the exchange rate between the euro and the US dollar (EUR / USD) out of 1.4, this means that the euro is equivalent to $ 1.4. Similarly, if the rate is calculated in reverse (USD / EUR), this results in a rate of 0.71, which means the dollar is equivalent to 0.71 euros.

The Birth of a system of exchange rates comes from the existence of an international trade between different countries with different currencies. If, for example, a Mexican company sells products to a Spanish company wants to charge in pesos, so the Spanish company must buy Mexican pesos and use them to pay the Mexican manufacturer. Individuals and companies who want to buy foreign currencies should see the currency market. In this market the price of each of the coins expressed in the national currency is determined. At this price it is called exchange rate.

A rate is a ratio that expresses the link between two magnitudes. Change, meanwhile, is to replace one thing for another.

Exchange rate

The notion of exchange rate, which can also be referred to as exchange rate refers to how much a coin X is available with a Y currency is, how many pesos need to buy a dollar, or how many bolivars'll have to deliver for one euro, for example.

It is, therefore, change the relationship between the currencies of two countries. The exchange rate can be real or nominal. The real exchange rate indicates the relationship when an individual wants to exchange goods or services between two nations, while the nominal exchange rate is the direct link between one currency and another foreign.

Another term related to this concept is the representative exchange rate market usually seen with the initials TRM and is the official measure of comparative between regional currency and foreign; This value is calculated taking into account the sale and purchase operations carried out in the international financial sector and should be respected within the territorial borders.