.
Currency (exchange) rate (exchange rate) – price per unit of national currency, expressed in units of foreign currency[27].
Exchange rate – this is not a technical conversion factor, and the «price» of the currency of the country, expressed in foreign currency or international currency units.
The exchange rate is necessary for the international foreign exchange, settlement, credit and financial transactions. For example, exporters exchanging foreign currency proceeds to the national as well as in normal circumstances, the currencies of other countries are not treated as cash funds within the State. Importer acquires foreign currency to pay for purchased goods abroad.
3.2. The basis of the exchange rate
Cost basis of the exchange rate is purchasing power parity (PPP etc.), that is, the ratio of rates for their purchasing power. Purchasing power is the national average price levels for goods, services and investments. In the free exchange of the notes for gold and gold free circulation between the two countries exchange rate slightly deviates from PPP because of the mechanism of gold dots. The mechanism of gold dots – the limits of deviation from the monetary exchange rate parity (usually less than 1%) lower (at which begins the outflow of gold from the country) and upper (starts its flow). Monetary parity – the ratio of weight of gold in monetary units (coins) in various countries.
In the paper money circulation exchange rates may significantly deviate from the PPP[28]. In many developing countries and countries with economies in transition, the exchange rate in 2 – 4 times lower parity. Deviation from the PPP exchange rate is influenced by supply and demand for the currency, which in turn depends on various factors.
Exchange rates are published in the press. Typically, in the current information contained in the previous two quotes of the day and short-term forecasts.
3.3. Factors affecting the exchange rate
Should distinguish between circumstantial and structural (long term) changes affecting the exchange rate.
Conjuncture factors affecting the exchange rate:
– The state of the economy (inflation rate, interest rates, currency markets, speculation, monetary policy, balance of payments, the extent of the use of national currencies in international payments, the acceleration or delay of International Settlements);