Exchange Rates between Currencies for Newbies

Markets for the purchase and sale of foreign currencies exist all over the world. In these markets, U.S. dollars can be exchanged for Canadian dollars, British pounds, Japanese yen, Euros, or any other legal currencies. The price of one currency stated in terms of another currency is called a foreign exchange rate Price of one currency stated in terms of another currency. Exhibit 15A.2 lists recent exchange rates for selected currencies. The exchange rate for British pounds and U.S. dollars is $1.8980, meaning 1 British pound could be purchased for $1.8980. On that same day, the exchange rate between Mexican pesos and U.S. dollars is $0.0925, or 1 Mexican peso can be purchased for $0.0925. Exchange rates fluctuate due to changing economic and political conditions, including the supply and demand for currencies and expectations about future events.

EXHIBIT 15A.2 Foreign Exchange Rates for Selected Currencies* * Rates will vary over time based on economic, political, and other changes.

Point: To convert currency, see XE.com

Decision Insight
Rush to Russia Investors are still eager to buy Russian equities even in the face of rampant crime, corruption, and slow economic growth. Why? Many argue Russia remains a bargain-priced, if risky, bet on future growth. Some analysts argue that natural-resource-rich Russia is one of the least expensive emerging markets. ▪