What are the types of exchange rates

What are the types of exchange rates
What are the types of exchange rates

What are the types of exchange rates?

In this post, we have written What are the types of exchange rates.

Some of the major types of foreign exchange rates are the following:

1. FIXED EXCHANGE RATE

A fixed exchange rate also referred to as the pegged exchange rate, is “pegged” or connected to another currency or asset often gold to get its value. This kind of exchange rate mechanism makes sure the stability of the exchange rates by linking it to a well-balanced currency itself. Also, a fixed currency system is almost well protected against the quick fluctuations in inflation. Some countries adhering to a fixed-rate system include the Bahamas, Denmark, Saudi Arabia, and Hong Kong.

Advantage: A country with a fixed exchange rate system is appealing to foreign investors who’re tempted to invest in that country because of the stability it offers.

Disadvantage: The government of a country following this type of system has to keep a large number of foreign exchanges or gold reserves to keep its value. This system, therefore, proves to be a costly one.

2. FLEXIBLE EXCHANGE RATE

Flexible or Floating exchange rate systems are ones through which the rate of a currency is determined by the market forces fo supply and demand. Unlike the fixed exchange rate they cannot get their value from any underlying. Some economists assert that the floating system is better because it absorbs the shocks of a worldwide crisis and automatically changes to reach an equilibrium.

The central bank of the country might interfere in economically utmost situations like the recession or boom to stabilize the currency. They could buy or sell an amount of the currency to stop the rates from going haywire. This phenomenon is called the managed float.

3. Managed Floating Rate System

Why is the exchange rate important?

Apart from factors like interest rates and inflation, the currency exchange rate is among the most important determinants of a country’s relative degree of economic health. A higher-valued currency makes a country’s imports more affordable and its exports more costly in foreign markets.

see also: Why is Buying Bitcoin So Hard

Mybtc.ng is a platform that provides an easy solution to perform to buy, sell giftcards, and also cryptocurrencies. Mybtc.ng is one of Nigerian’s top Crypto exchange platform, the number 1 Guide to Digital Exchange in Nigeria. My BTC Nigeria helps guide people through the exchange process . They give you the best exchange rate, this platform provides you with the simplest solution to cryptocurrency and gift card exchange. Visit mybtc.ng now for an impressive exchange rate.

Thanks for reading this article.

 

Your Comment:

Related Posts

Crypto

Is mining bitcoin worth it

Is mining bitcoin worth it? The simple answer is yes, however it is complicated. Bitcoin as was said became a well paid hobby for those who started early, who had the opportunity to earn over 50 BTC each 10 minutes, mining from their bedroom. Successfully mining just a Bitcoin block, and holding unto it since 2010 would […]

Crypto

How Does Bitcoin Mining Work

How Does Bitcoin Mining Work? In this article we have written How Does Bitcoin Mining Work?. Cryptocurrency mining is demanding, costly and only sporadically rewarding. Though mining has a magnetic appeal for many investors that are interested in cryptocurrency because of the fact that miners are payed for there work with crypto tokens. How long does it[…]