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·         The exchange rate is the price of one country’s currency and the other currency (foreign currency). Most trade rates utilize the US dollar as the base cash and different monetary standards as the counter money. The exchange rates from most of the currencies are quoted as four places after decimal.

·         FLOATING VS FIXED

·         Exchange rates maybe floating or maybe fixed. A floating exchange rate is where a exchange rate is resolute by market services. And some of the countries prefer fixed exchange rate like USA. The reason for this to maintain the relation with the business countries.

https://www.investopedia.com/terms/e/exchangerate.asp

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What Is Exchange Rate

An exchange rate is the value of one nation's currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro? As of September 24, 2021, the exchange rate is 1.1720, meaning it takes $1.1720 to buy €1.

Understanding Exchange Rate

Typically, an exchange rate is quoted using an acronym for the national currency it represents. For example, the acronym USD represents the U.S. dollar, while EUR represents the euro. To quote the currency pair for the dollar and the euro, it would be EUR/USD. In the case of the Japanese yen, it's USD/JPY, or dollar to yen. An exchange rate of 100 would mean that 1 dollar equals 100 yen.

Typically, exchange rates can be free-floating or fixed. A free-floating exchange rate rises and falls due to changes in the foreign exchange market. A fixed exchange rate is pegged to the value of another currency. For instance, the Hong Kong dollar is pegged to the U.S. dollar in a range of 7.75 to 7.85. This means the value of the Hong Kong dollar to the U.S. dollar will remain within this range.

Exchange rates can have what is called a spot rate, or cash value, which is the current market value. Alternatively, an exchange rate may have a forward value, which is based on expectations for the currency to rise or fall versus its spot price.

Forward rate values may fluctuate due to changes in expectations for future interest rates in one country versus another. For example, let's say that traders have the view that the eurozone will ease monetary policy versus the U.S. In this case, traders could buy the dollar versus the euro, resulting in the value of the euro falling.

Exchange rates can also be different for the same country. Some countries have restricted currencies, limiting their exchange to within the countries' borders. In some cases, there is an onshore rate and an offshore rate. Generally, a more favorable exchange rate can often be found within a country's border versus outside its borders. Also, a restricted currency can have its value set by the government.

China is one major example of a country that has this rate structure. Additionally, China's yuan is a currency that is controlled by the government. Every day, the Chinese government sets a midpoint value for the currency, allowing the yuan to trade in a band of 2% from the midpoint.

Exchange Rate Example

John is traveling to Germany from his home in New York and he wants to make sure he has 200 dollars' worth of euros when he arrives in Germany. He goes to the local currency exchange shop and sees that the current exchange rate is 1.20. It means if he exchanges $200, he will get €166.66 in return.

In this case, the equation is: dollars ÷ exchange rate = euro

-or-

$200 ÷ 1.20 = €166.66

John has returned from the trip, and he now wants to exchange his euros for dollars. He never used his €166.66 and now sees the exchange rate has dropped to 1.15. He exchanges his €166.66, and because the rate fell when he was away, he receives only $191.67. The reason he gets less despite having the same value of euros is that the euro weakened versus the dollar during his time away.

In this case, the equation is the opposite: euros x exchange rate = dollars

-or-

€166.66 x 1.15 = $191.66

However, not all currencies work the same way. For example, the Japanese yen is calculated differently. In this case, the dollar is placed in front of the yen, as in USD/JPY.

The equation for USD/JPY is: dollars x exchange rate = yen

Let's say someone traveling to Japan wants to convert $100 into yen, and the exchange rate is 110. The traveler would get ¥11,000. To convert yen back into dollars one needs to divide the amount of the currency by the exchange rate.

$100 x 110 = ¥11,000.00

-or-

¥11,000.00/110= $100

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An exchange rate is the value of one nation's currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro? As of September 24, 2021, the exchange rate is 1.1720, meaning it takes $1.1720 to buy €1.

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The website shows the factors affecting the value of Canadian dollars.

These are given below:

Interest rates: higher interest rates can increases the foreign investors. . In the event that outside speculators envision a decrease in the estimate of the Canadian dollar, they request a higher credit charge on Canadian dollar securities.

Commodity prices-there are large part of commodities in Canada compare to USA. The goods that Canada exporting is much more valuable. Since Canada's buying power is high that can results in higher exchange rates.

Productivity: the ratio of output that produced with the given input can be helpful to know about the exchange rate. For example if a product of Canada become popular in United States then the value of Canadian dollars over the time increases.

There are many more factors such as international trade of goods and services, foreign debts and investments, inflation rates etc.

https://hillnotes.ca/2018/09/26/the-canadian-dollar-what-determines-the-exchange-rate/

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From the beginning of World War II until 1950, and again from 1962 to 1970, the value of the Canadian dollar was fixed in relation to the U.S. dollar. The Bank of Canada was responsible for intervening in the marketplace to maintain the fixed value of the currency.

Now, the exchange rate between the Canadian dollar and any foreign currency is determined by the forces of supply and demand, that is, like the value of any other openly traded good or service. Factors that increase (or decrease) demand for the Canadian dollar, or that decrease (or increase) demand for foreign currency, place upward (or downward) pressure on the exchange rate.

Factors Affecting the Value of the Canadian Dollar

Economic theory and empirical evidence have identified factors that, in isolation from one another, have predictable effects on exchange rates. However, predicting exchange rate movements is difficult because these factors interact at the same time. Often, the reasons underlying recent movements are evident only in hindsight.

The main factors known to influence the value of the Canadian dollar are:

Interest rates: Relatively higher interest rates in Canada increase foreign investors' demand for Canadian dollar-denominated securities. However, the rate of return of foreign investors is dependent on the expected future performance of the Canadian dollar. If foreign investors anticipate a decline in the value of the Canadian dollar, they demand a higher interest rate on Canadian dollar securities.

Commodity prices: The value of the Canadian dollar is correlated to the strength of world commodity prices. Commodities represent a larger share of exports in Canada compared to the United States and many other countries. When commodity prices rise, Canada's terms of trade improve because its goods have become relatively more valuable. Since Canada's effective purchasing power is higher, this movement is usually reflected in a higher exchange rate. The opposite also holds: weaker commodity prices can translate into a weaker Canadian dollar.

Inflation rates: Inflation is the rate at which general price levels rise over time. If inflation in Canada were to exceed foreign inflation rates, this would reduce the purchasing power of the Canadian dollar relative to foreign currencies. That reduction would be reflected in a relative decline in the value of the Canadian dollar. The opposite is also true. Sustained, relatively low inflation in Canada has a positive influence on the exchange rate.

International trade of goods and services: When a country has a trade surplus, exports exceed imports, putting upward pressure on the exchange rate (the demand for the currency exceeds the supply). When a country has a trade deficit, imports exceed exports, putting downward pressure on the exchange rate (the supply for the currency exceeds the demand).

Foreign investment and debt payments: Inflows of foreign investment in Canada increase the foreign demand for Canadian dollars, pushing the exchange rate up. Direct investment made by Canadians abroad has the opposite effect. Debt payments made to foreigners push the exchange rate down.

Productivity: A country's productivity - the amount of output that can be produced with a given level of inputs - can be a factor in the determination of the exchange rate through its effect on relative prices and international competitiveness. For example, if productivity in Canada were to grow faster than in the United States, the prices of Canadian goods would become more competitive and, over time, Canadian output and exports would increase, leading to greater demand for Canadian dollars.

What Explains the Recent Performance of the Canadian Dollar?

From January 2002 to November 2007, the Canadian dollar increased from a low of 62 cents U.S. to 1.04 U.S. dollars due to rising energy prices and strong U.S. demand for Canadian exports.

In response to the 2007 housing market crash, in September 2007, the U.S. Federal Reserve Bank reduced its target interest rate from 5.25% to an unprecedented level of 0% to 0.25% in December 2008. As the negative impact of the related 2008 financial crisis spread to other economies, the resulting economic slowdowns and contractions triggered sharp declines in both energy prices and the U.S. trade deficit. As a result, by early 2009, most world currencies, including the Canadian dollar, had lost most of their pre-2008 gains against the U.S. dollar.

In response, the Bank of Canada lowered its target interest rate from 3% in October 2008 to a historic low of 0.25% in April 2009 and maintained it at that level until May 2010. This significantly reduced the target interest rate difference between Canada and the U.S. at a time when energy prices and Canadian exports were rebounding. These factors in turn increased the value of the Canadian dollar from 78 cents in March 2009 to 1.05 U.S. dollars in July 2011.

With a target interest rate of almost zero and the implementation of a fiscal stimulus package, the U.S. economy gradually recovered from the 2008 financial crisis. This resulted in growing productivity and employment and an inflow of investments in the U.S. Since energy prices remained relatively stable, by comparison, the Canadian dollar slowly lost its appeal and dropped below 90 cents U.S. in early 2014.

In the two following years, investors' demand for U.S. dollar-denominated assets further increased as the U.S. economy continued to improve steadily while most other developed economies struggled to recover. The weak global demand for energy and excess supply from the expansion of oil and gas extraction techniques, particularly "fracking" in the U.S., reduced energy prices in early 2016 to their lowest levels since the early 2000s. Low energy prices, combined with the strength of U.S. dollar reduced the value of Canadian dollar to below 70 cents U.S. in January 2016.

Between January 2016 to June 2018, the slow but steady recovery in energy prices increased the value of the Canadian dollar from 70 cents U.S. to 76 cents U.S.
Author: Shaowei Pu, Library of Parliament (adapted from a publication by Michael Holden)
APPENDIX
Figure 1 - The Canada-U.S. Exchange Rate, U.S. Dollar per Canadian Dollar, 1951-2018
Note: The exchange rates are monthly averages. In 2018, only monthly data from January to July are presented.
Source: Figure prepared by the author using data obtained from Statistics Canada. Table 33-10-0163-01 Monthly average foreign exchange rates in Canadian dollars, Bank of Canada, and Table 10-10-0009-01 Foreign exchange rates in Canadian dollars, Bank of Canada, monthly, accessed 23 July 2018.
Figure 2 - Real Commodity Prices and the Canadian Dollar
Note: Commodity Price Index in January 2000 = 100. The exchange rates are monthly averages. In 2018, only monthly data from January to July are presented.
Source: Figure prepared by the author using data obtained from the Bank of Canada, the Bank of Canada commodity price index (BCPI); and Statistics Canada, Table 33-10-0163-01 Monthly average foreign exchange rates in Canadian dollars, Bank of Canada, and Table 10-10-0009-01 Foreign exchange rates in Canadian dollars, Bank of Canada, monthly, accessed 23 July 2018.
Figure 3 - World Currencies' Performance Against the U.S. Dollar, Exchange Rate Index
Note: Exchange rate index in January 2001 = 100. The exchange rates are monthly averages. In 2018, only monthly data from January to July are presented.
Source: Figure prepared by the author using data obtained from the Board of Governors of the Federal Reserve System (US), U.S. Dollar Exchange rates (monthly rate), accessed 23 July 2018.
Figure 4 - Target Interest Rate Spreads and the Canadian Dollar, 2008-2018
Notes: The target interest rate spread represents the difference between the Bank of Canada's target for the overnight rate and the U.S. Federal Reserve's target for the federal funds rate. Effective 16 December 2008, the target interest rate for the U.S. is reported as a range with a lower limit and an upper limit. The rates are midweek rates (Wednesday). In 2018, only weekly data from January to July are presented.
Source: Figure prepared by the author using data obtained from the Board of Governors of the Federal Reserve System (US), Federal Funds Target Rate, Federal Funds Target Range - Upper Limit, Federal Funds Target Range - Lower Limit, and Canada / U.S. Foreign Exchange Rate; and Statistics Canada, Table 10-10-0139-01 Bank of Canada, money market and other interest rates, accessed 30 August 2018.

Categories: Economics and finance

Tags: Canadian dollar, Exchange rate

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The Canadian Dollar: What Determines the Exchange Rate? - HillNotes

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From the beginning of World War II until 1950, and again from 1962 to 1970, the value of the Canadian dollar was fixed in relation to the U.S. dollar. The Bank of Canada was responsible for intervening in the marketplace to maintain the fixed value of the currency.

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It shows the highest top 10 currency in the world.

1.    Kuwaiti dinar(KWD):1 KWD=4.34 CAD

The value of Kuwaiti diner keeps growing while the other currency rates are keep falling.

2.    Bahraini dinar (BHD):1 BHD=3.50 CAD

Also called as Persian rupee. Usually used in global oil trade operations.

3.    Omani real;1 OMR=3.43 CAD

4.    Jordanian dinar: 1JOD= 1.86 CADwith this money, it is particularly conceivable to perform gainful tasks on the overall exchange advertise. These currency is attractive and colorful and having Arabic script written on notes.

5.    British pound: 1GBP = 1.68 CADworld famous and used in world trade operations.

6.    Gibraltar pound: 1GIP =1.69CAD same size as us dollars but the different design.

7.    Euro: 1EUR=1.50 CADit is primarily currency used in the Europe nation.

8.    Cayman islands dollar:1KYD=1.58CAD

9.    Swiss franc: 1CHF =1.32CAD is the national currency of Switzerland and Liechtenstein.

10. The United States dollar:1USD=0.76CAD  highest demand. The money value is used in all the countries.

https://www.legit.ng/1116550-highest-currency-world-2018-top-10.html

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Do you want to find out what is the highest currency in the world 2018? Perhaps you would like to learn more interesting facts about the strongest currency in the world? We have listed the top 10 countries with the highest currency for you and describe each one of them in a detail!
Factors of the highest currency in the world

There is a different currency in every country, which is the reason why every currency has a certain value if you attempt to exchange it for the other ones. It is widely known and believed that the prosperity and development of a country affects its currency value.

There are around 180 currencies in the modern society. All of them have different values. Some people might assume by mistake that the most expensive currencies are dollar, euro or British pound. But this is absolutely wrong: there are some higher valued currencies than these three.

In the economic field, the ratings that deal with the highest currency and its relation to the local one are regularly put together. It should be clarified that the ratings mention the same currencies all the time.

Strongest currency in the world

10. The United States Dollar

If you were wondering which currency has the highest demand, it is definitely the Dollar. This money value is used basically in all the countries of the world. The dollar exchange rate fluctuates very often, and now it is approximately 360.473 Naira per dollar. For all currencies, we have taken exchange rates from the XE Currency Converter.

READ ALSO: Checkout list of top 10 strongest currencies in Africa

9. Swiss Franc

Swiss franc (shortened to CHF) is the national currency of Switzerland and Liechtenstein. The Swiss franc traditionally refers to the currencies which are used in tax havens or offshore zones, with no inflation, legislatively secured gold, and foreign exchange reserves. 1 CHF price is 374.707 NGN.

8. Cayman Islands Dollar

Currently, you can get one Cayman Islands dollar for 439.621 NGN. It is indicated by a special KYD symbol. This dollar was officially introduced to the money market in mid-1972 and is now successfully used. The course has a direct relation to the current dollar rate. If the dollar's price changes, the parallel change in the rate of this unit to world currencies will also happen. This has to be taken into account when we consider the Cayman dollar price.

7. Euro

Euro is known to be the primary money unit of the European Union, which includes a huge number of European countries. Its special designation is EUR. Due to the prevalence in the EU, euro has become extremely popular all over the world. This is why it quickly has become known as the most expensive currency. Today it is used not only in cash settlements but also highly popular in non-cash organizations. 17 countries of the EU use Euro. The rate of this currency in relation to the Nigerian Naira is approximately 442.100 NGN.

6. Gibraltar Pound

This currency lately made the list of the most expensive money in the world. Gibraltar Pound, which is abbreviated as GIP, is on the level of British pounds, and this is the reason why it is trading at the same rate as the United States dollar. Gibraltar Pound appeared in 1934. It is curious to know that the money of Gibraltar is of the same size as United States money, but they have a different banknote design.

The rate of the Gibraltar Pound relatively to the Nigerian Naira is approximately 496.673 NGN.

5. British Pound

One of the most expensive and famous world currency funds is the British Pound (GBP). It is often used in the international trade operations. It circulates every day in the UK, as well as in Northern Ireland. Nowadays, approximately 496.722 NGN is the rate for one pound.

After the World War II in 1945, the British pound obviously lost in value, which was due to the economic fall of the first years after the war and the country's American capital. After a short while, the Pound its positions on the world market. Today, it is one of the most demanded international financial units. GBP is constantly being enhanced in value compared to the other world national currencies.

It is important to notice that different administrative areas of Great Britain have banknotes that look differently. This fact does not contradict the modern country legislation, and the money can be accepted in different banks worldwide.

4. Jordanian Dinar

Except for the expensive currencies that are listed above, one of the most well-known and pricey ones is also Jordanian dinar. It costs about 508.441 NGN. This currency is known by the abbreviation JOD. It started being produced and was put in common use in late 1949. Soon enough, it outperformed the Palestinian pound.

There are images of royal family and beautiful design on this banknote, so its style is definitely considered outstanding. The banknote has some inscriptions in the Arabic language. This currency looks attractive to many people from a plenty of countries. With this currency, it is very much possible to perform profitable operations on the worldwide trade market.

3. Omani Rial

This currency is ranked third among the most expensive currencies in the world. It is shortened to OMR. One Omani rial equals about 937.541 NGN. This is the first banknote that has messages in English on one side, and signs in Arabian on the other side. Omani rial went into circulation in late 1979, replacing Saidian real. Now, these banknotes are considered protected from fake ones in the best way, and their design is one of the most beautiful and attractive banknote designs.

2. Bahraini Dinar

Currently, one Dinar equals around 958.735 NGN. Earlier, the Indian rupee was the national currency of Bahrain. Starting from mid-1959, the banknote called Persian rupee has been circulating in the country. After six long years, Persian Rupee totally lost its price, and the government of Bahrain made a decision to create their own currency. It is written as BHD. Bahraini Dinar is usually widely used in the worldwide oil trade operations.

Lastly, here is an answer to your possible first question: what is the most expensive currency in the world? The highest currency in the world, as of today, is Kuwaiti dinar.

1. Kuwaiti Dinar

This currency is abbreviated as KWD. The price of one Kuwaiti dinar equals approximately 1,197.92 NGN. That's why Kuwait is a country with the highest national currency in the world. Statistically, the general population of Kuwait is about 3.1 million people. It is interesting that one in seventeen people in Kuwait is considered to be a millionaire depending on this person's income per year.

This country is wealthy and prosperous, and 10% of the world's oil reserves indicate that. Furthermore, the value of Kuwait's national currency keeps growing every year compared to many other currencies which are falling. The Kuwaiti dinar was introduced to the market in the middle of 1961. Before that, the country used Indian rupee. It was considered the first and main currency of the state. Now Kuwait's dinar is the most valuable currency in the entire world in relation to Naira and a huge amount of other modern global currencies.

We have listed the most valuable currencies in the world for 2018. They officially circulate on the territories of world's different countries and have a large role in world commercial trade. Every trader needs to know about the primary currencies and the possible changes in their rates. The country with the highest currency is currently Kuwait.
READ ALSO: Naira and Cedis: Which is more valuable?
Source: Legit.ng

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10 top currencies with the highest values in 2018

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What is the ✅ HIGHEST CURRENCY in the world by 2018 ✅ ? We have listed the top 10 countries with the highest currency for you and described each one of them in details. Verified data only! Click to read now on Legit.ng

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the images shows the factors affecting exchange rates.
political stability and economic performance.
terms of trade
account deficit
inflation
interest rate
public debts

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the image shows the advantages and disadvantages of fixed exchange.

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here the image shows the simple formula of exchange rate.
for example if we want to calculate the exchange rate for india then.
c=50$X53.41 rupees
c=2,670 rupees

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in the below mentioned video it shows the role of individual in exchange  rate.
as an individual we buy goods from different brands and different origins.for example i am in canada and i buy maggie then i am buying maggie in canadian dollars but the grocery store buy that product in in terms with indian rupees and indirectly i am buying that product in indian rupees.if the product demands go high and so the value of that currency increases because of demand.

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In this video they have talked about some positive and negative effects of exchange rates. for the appreciation they said that it has increased the living standards because a $ with high value in country makes more in costly products in other country, secondly it effects long run structural changes because high dollar rates reduces the international competitiveness. Talking about the negative effects, the last point which I mention in the advantages is same like high dollar there is reduction in the competitiveness but it somewhere effect the growth because people will not buy products due to high rates. so there are both negative and positive sides of exchange rates.

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HSC Economics - Effects of the Exchange Rate

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the video explains that how dollar became the world currency. The US dollar has crashed 5 times in time period of 135 years and finally the plane note federal reserve note was printed in 1914. in the World War two many countries have taken loan by giving gold and they were given dollars and by the end of World War the America was having more gold than dollars and this lead the country back in the economy as all the business was now done in dollars. After this the American president decide to get their all money back and this made the economy of America again rich as the dollar was already at higher rates.

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How The U.S. Dollar Shaped The World Economy | Long Story Short | NBC News