This refers to the value of one currency against another, or against a basket of currencies and refers to the amount of one currency required to purchase another currency.
Bilateral exchange rates reflect the values between two currencies. Multilateral exchange rates reflect the value of a currency against a basket of other currencies, these are used to identify average trends in currency values
Exchange rates typically reflect the financial market’s assessment of the economic strength and political stability of each country; and the consequent supply and demand for investments in those currencies. Changes in exchange rates can occur very quickly and can have a significant impact on business with international operations or customers. Exchange rates is a term normally found in economic and financial management; explore our learning zone to discover more.