Short definition: An exchange rate is the price of one currency expressed in terms of another currency.
Explanation: It represents the value of one currency relative to another and determines how much of one currency is needed to buy a unit of another currency. Exchange rates fluctuate constantly based on supply and demand in the foreign exchange market.
Example: If the exchange rate between the US dollar and the euro is 1.20, it means that 1 US dollar can be exchanged for 1.20 euros.
Additional information (optional): Exchange rates play a crucial role in international trade and investment, as they affect the prices of goods and services traded between countries. They can also impact a company’s profitability if it operates in multiple countries and generates revenue in different currencies.