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When speaking of exchange rate, it is usually referred to the exchange association that can be established between two currencies of different nations. This information allows you to know how much of an X coin can be obtained by offering a Y coin. In other words, the exchange rate indicates how much money I can buy with currencies from another country.
It should be noted that exchange rates are quite important in several ways; Primarily for companies that work globally as multinationals, or import companies have always to take into account the movement of exchange rates, since according to international accounting laws, at least an annual review of The exchange rates of our assets located in other currency areas; As well as if we export and import products or services, we are required to account for expressing the origin value as well as the exchange rate and the value of our own currency in the transaction.
This comparison can be analogous to all the world’s currencies, which are, in short, the ways in which currency transactions are currently made, as well as the value of goods and services. Framed within exchange rates, we can speak of two types:
• Real exchange rate: it is in which they are valued or relative price of goods and services depending on the amount or situation of the currency of each of the countries in which these goods and services are generated. In short, the value of activities and things.
• Nominal exchange rate: this is the variation or fluctuation over time of the values of a particular currency or currency depending on another.
The Central Bank of each nation can choose between multiple exchange rate systems. The fixed exchange rate is established by the Central Bank (the institution decides the price of the currency). In contrast, the so-called floating or flexible exchange rate allows the values to be established based on the system based on supply and demand.
Fixed exchange rate
The government of a country establishes the value of its national currency by associating the value with that of the currency of another country. Within the fixed exchange rates there are several exchange rate regimes depending on the performance of the central bank. Some regimes are as follows, ordered from the strictest to the most flexible:
• Currency or convertibility regime: this is the most strict category of fixed exchange rate, an exchange rate is established by law. Its rules work in the same way as the gold standard, the central bank is forced to immediately convert into the linked currency whenever a citizen presents cash. To do this, you must have 100% of your monetary mass backed by dollars saved in your reserves.
• Fixed rate conventional regime: a country sets its currency with margins of +/- 1% over another currency or basket of currencies. It can use direct intervention policies (buy or sell the currency), or indirect policies of intervention (lower or raise interest rates, for example).
Floating exchange rate
The exchange rate is determined by the supply and demand of foreign exchange in the market. There are two types of floating exchange, one completely free and another somewhat intervened:
• Clean floating: the situation in which the currencies are the exchange rate that is obtained from the game of supply and demand, without the central bank intervening at any time. It is also known as an independent flotation type.
• Floating dirty: the situation where the currencies are the exchange rate that is obtained from the game of supply and demand, but in this case the central bank is forced to intervene buying or selling to stabilize the currency And achieve economic goals. It is also known as floating exchange rate administered, as it has a directed flotation but not previously announced.
At the moment, it must be established that the bases of exchange rate operations have as a backbone or spine the dollar. However, throughout history this has not always been so at first the currency that was taken as fundamental pillar was the pound sterling, she was the one that determined the change.
However, the aforementioned event was completely modified by World War II. And it is during this war England was ravaged by it and that brought with it that its currency lost value, so it was replaced in this economic area and exchange for the mentioned dollar.

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