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Types of Exchange Rates

The currency exchange rate is the epitome element of overseas money transfers. Anyone who wishes to transfer money online or in-store must know the meaning and importance of exchange rates for better yield in their foreign transactions

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Types of Exchange Rates

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  1. Types of Exchange Rates

  2. The currency exchange rate is the epitome element of overseas money transfers. Anyone who wishes to transfer money online or in-store must know the meaning and importance of exchange rates for better yield in their foreign transactions. So basically, the currency exchange rate is the value of one nation’s currency in terms of another currency. Both the components of the exchange rate, the domestic currency and foreign currency can be quoted directly or indirectly.

  3. Here are the various types of exchange rates in the market: Fixed exchange rate: Also known as the pegged exchange rate, it is a relatively well-protected exchange rate that withstands rapid fluctuations in inflation. The currency values remain stable and unchanged throughout unless an intervention of the government takes place. Denmark, Hong Kong, the Bahamas & Saudi Arabia have fixed exchange rates. ●

  4. Flexible or Floating exchange rate: Here the rate of a currency is determined by the market forces of demand and supply. Some economists argue that a floating system is more preferable. Why? Because it can handle any shocks of financial global crisis and automatically adjusts to arrive at an equilibrium. ●

  5. Forward rate: This exchange rate is determined as per the terms of a forward contract. It already seals the purchase of a foreign currency at a predetermined rate at some date in the future. This forward contract is beneficial for exporters and importers who are reluctant to get exposed to Forex fluctuations. ● Spot rate: It is the rate at which your currency shall be purchased if you decide to do a foreign transaction “right now”. Spot rate represents the day-to-day exchange rate and varies by a few basis points each day. ● ●

  6. These are the types of exchange rates seen in the world economy, employed by various countries for their economic favourability. The best online money transfer in Australia takes stringent efforts to offer the best exchange rates for its precious customers so as to save their hard-earned money.

  7. THANK YOU

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