An exchange rate shows the value of one currency compared to another in global markets. It changes throughout the day based on supply and demand, economic data, interest rates, and market sentiment. These changes affect the cost of international trade, travel, investing, and cross-border transactions.
Exchange rates are quoted as currency pairs, such as EUR/USD or USD/JPY. The first currency is the base currency, and the second is the quote currency. The rate shows how much of the quote currency is needed to buy one unit of the base currency.
There are two main types of exchange rate systems.
Floating exchange rates move freely based on market forces.
Fixed or pegged exchange rates are controlled by a central bank and tied to another currency.
Many countries use a managed system that combines both approaches.
Exchange rates influence trade, investments, costs, profits, and global economic stability. They affect everything from corporate earnings to travel budgets and international business planning.
Daily exchange rates can shift due to central bank announcements, inflation readings, employment data, geopolitical events, and foreign capital flows. These factors change how investors value a currency relative to others.
Exchange rate changes impact revenue, expenses, and profitability for businesses operating across borders. Companies must monitor FX movements to manage pricing, budgeting, and financial reporting accurately.
Key indicators include interest rate decisions, inflation reports, GDP growth, employment data, and trade balances. These indicators influence how investors view the strength of a currency.
A weaker currency increases the cost of imported goods, which can raise domestic inflation. A stronger currency reduces import costs and can help stabilize prices in the local economy.
Central banks may intervene to stabilize their currency, support trade competitiveness, prevent excessive volatility, or maintain a targeted economic policy. Intervention can include buying or selling currency or adjusting interest rates.
If the EUR/USD exchange rate moves from 1.10 to 1.12, it means one euro now buys more U.S. dollars. This affects import costs, export pricing, and financial statements for companies dealing in both currencies.
FinFeedAPI’s Currency API provides real-time and historical exchange rates for major and minor currency pairs, and also crypto. Developers use this data for pricing systems, accounting tools, FX dashboards, trading models, and automated currency conversions.
