When you talk about exchange rate (expression that is also mentioned as exchange rate ) reference is usually made to the exchange association that can be established between two different currencies nations . This data lets you know how much of a coin X can be achieved by offering a coin AND . In other words, the exchange rate indicates how much money I can buy with currencies from another country.
In this way, for example, we can know how much one euro is worth in dollars and vice versa. Thus, we know that one euro, the currency that is in legal course in most countries of the European Union, is equivalent to approximately US $ 1,226. An operation is becoming something fundamental for different nations to carry out economic transactions between their companies.
The exchange operations (that is, the purchase and sale of multiple currencies) can be carried out in banks and in exchange houses that, in general, two exchange rates are quoted: one for purchases and the remaining for sales. For example: if I want to buy dollars, the price I must pay to the exchange house is 3.47 pesos for each dollar. On the other hand, if I want to sell the same currency, I will get 3.44 pesos for every dollar I deliver.
Two types of exchange can be mentioned: one known as real change and another that is called nominal exchange rate .
The real change is one that determines the equivalence by which a subject You can make an exchange of benefits or assets of one nation for those of another.
The nominal change, meanwhile, is based on the equivalence between a given currency and a foreign currency. It is the exchange rate that is contemplated in the banks and in the exchange houses.
In the same way, we cannot ignore that there is another classification or terminology that determines the exchange rates existing in the market. Thus, there is also talk of what is known as the buyer exchange rate, which is the price paid by the mentioned exchange house or the relevant banking entity. And there is also the exchange rate seller that refers to the price for which it sells.
He central bank Each nation can choose between multiple exchange rate systems. He fixed exchange rate It is established by the Central Bank (the institution decides the price of the currency). Instead, the so-called floating or flexible exchange rate allows values to be established based on the system based on supply and demand.
At this time, it is necessary to establish that the base of the exchange rate operations have as a column or backbone the dollar. However, throughout history this has not always been so because at first the currency that was taken as a fundamental pillar was the pound sterling, she was the one that determined the change.
However, that fact was completely modified on the occasion of World War II. And it is that during this warlike conflict England was devastated by it and that brought with it that said currency lost value, so it was replaced in this economic and exchange area by the mentioned dollar.