US Dollar Exchange Rate by Country 2024

Within the context of finance, an exchange rate is the rate at which a currency is exchanged for another currency. These currencies are typically national, although some exceptions exist. For example, the Hong Kong dollar is a sub-national currency, while the euro is a supra-national currency.

Policies

Economists also view the exchange rate between two currencies as the value of one currency in terms of the other currency. Each country or other government determines the exchange rate regime that applies to its currency, which primarily includes a floating, fixed or hybrid regime. Governments may also impose additional controls and restrictions on exchange rates involving their currency. While economists generally consider free trade to be the ideal trade policy, they have no such agreement on the optimal policy for exchange rates. Instead, exchange rate policies primarily reflect political considerations rather than economic ones.

Rate Determination

A foreign exchange market determines the exchange rate in a floating exchange rate regime. This currency exchange market is accessible to a range of investors, who continuously trade that market's currencies except during the weekend. Several types of exchange rates exist in currency exchange markets. For example, the spot exchange rate is the exchange rate at the present time. In comparison, the forward exchange rate is a rate that a seller quotes for the delivery and payment of a currency at a specified future date.

Currency dealers quote many different rates for buying and selling currencies in retail currency exchange markets, which typically trade in the local currency. A buying rate is the rate at which traders will buy a foreign currency with the local currency, while a selling rate is the rate at which they will sell a foreign currency for local currency. Quoted rates may include the dealer's profit in the trade, but dealers can also make their profit in other ways like a commission.

In addition, currency dealers may quote different rates for different exchange mediums, such as cash, electronic transfers and documentary transactions. For example, documentary transactions have a higher exchange rate than cash to cover the cost of compensating dealers for the time and cost of clearing the document.