What Is an Exchange Rate?

By Kristi Waterworth – Updated Dec 16, 2024 at 2:01 PM

Key Points

Exchange rates define the cost of one currency in terms of another and fluctuate based on economic factors.
Key influencers of exchange rates include interest rates, inflation, and political stability.
Investors consider exchange rates crucial for forex trading and international business operations.

Whether you're dealing in the currency markets or you're simply trying to buy goods from another country, the exchange rate is an important concept to understand. We'll walk you through it in this article.

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U.S. and foreign banknotes rolled up next to one another. — Image source: Getty Images.

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Forex Trading Robot

A piece of software that automates trades on the foreign exchange market which primarily deals in “spot” trading or immediate currency trades, but other types of currency.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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