Exchange Rate

Exchange rate means the price of one country’s currency compared with another country’s currency. In simple terms, an exchange rate shows how much one currency is worth in another currency. Exchange rates are important because they affect international trade, travel costs, imported goods, exports, inflation, and investment returns. When a currency becomes stronger, foreign goods may become cheaper for people in that country. When a currency becomes weaker, imported goods may become more expensive. For example, if 1 U.S. dollar equals 1,300 Korean won, the exchange rate between the U.S. dollar and the Korean won is 1,300 won per dollar. An exchange rate is not fixed forever. It can change because of interest rates, inflation, trade, economic growth, investor confidence, and government or central bank actions.