exchange rate

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exchange rate:

see foreign exchangeforeign exchange,
methods and instruments used to adjust the payment of debts between two nations that employ different currency systems. A nation's balance of payments has an important effect on the exchange rate of its currency.
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Exchange rate

The rate at which outside air replaces indoor air in a given space.

Exchange Rate

 

foreign-exchange rate, the price of the monetary unit of one country as expressed in monetary units of another country (for example, 1 pound sterling = 2.1511 rubles, 1 US dollar = 5.1732 Swedish kronor). Inall countries except Great Britain direct quotation is used, under which the exchange rate is set for one unit (or for 100 or 1,000 units) of foreign currency in the national currency of the given country. In Great Britain reverse quotation is used: the exchange rate is set for 1 pound sterling in foreign currencies. Payments are made according to the exchange rate between countries linked by international economic, political, and cultural relations (transactions in the purchase, sale, and exchange of currency for payments in foreign trade; transactions in the transfer of capital; and so forth). Under the gold standard the level of the exchange rate was determined by gold parity, that is, by the relationship between the gold content of the monetary units of the corresponding countries. Fluctuations in the exchange rate caused by the condition of the balance of payments occurred within the limits of the gold points. Under paper-money circulation and inflation, which are characteristic of the epoch of the general crisis of capitalism, the level of the exchange rate depends on the degree of depreciation of money with respect to gold and commodities (that is, the purchasing power of paper money) and on the demand for and supply of the given currency, which in turn is related to the condition of the country’s balance of payments. In addition, trust in a currency and its stability is of great importance for the exchange rate. Under the conditions of state-monopolistic capitalism, the governments of the capitalist countries are striving to regulate the exchange rate. In the 1930’s the governments of many countries sought to lower the exchange rate for their currencies so as to make their countries’ goods more competitive in the foreign markets and thereby stimulate exports (foreign-exchange dumping). According to the charter of the International Monetary Fund, which was created after World War II, the member countries of the fund are required to establish in coordination with it the gold content of their national currency and the parity rate of their currency with respect to the US dollar, without allowing deviations from it in any direction of more than 1 percent. However, despite this, most of the member countries of the fund were compelled to devalue their currencies, and some countries had to do so several times. Manipulations with the exchange rate are frequently used by the imperialist powers to obtain additional profits on the basis of nonequivalent exchange with other, particularly developing, countries.

Foreign currency is purchased by banks, which are the main intermediaries on the foreign-exchange market, at a somewhat lower rate (the buyers’ rate) than that at which they are sold (the sellers’ rate). The difference between these rates (the margin) constitutes the bank’s revenue from currency operations.

In socialist countries the parities of foreign currencies are established taking into account the comparative purchasing power of money in regard to goods and services. Changes in the exchange rates of the currencies of capitalist countries in the currencies of socialist countries (currency quotation) reflect fluctuations of the exchange rate of foreign money on foreign-exchange markets abroad. Accounts in foreign trade between socialist member countries of the Council for Mutual Economic Assistance (COMECON) are settled in convertible rubles and, with other socialist countries, through clearing in rubles. Every socialist country has set an official exchange rate for the convertible or clearing ruble in its own currency. Payments between socialist countries on nontrade operations employ markups or discounts on the official exchange rate, computed on the basis of retail prices for consumer goods and services and coordinated between the partners of the transaction. By this means full equivalency is achieved in payments on nontrade operations, and this supplements the equivalency in payments on foreign trade, an equivalency assured by the coordinated stable prices of the world socialist market.

M. O. POLIAKOV


Exchange Rate

 

the price of the monetary unit of one country expressed in the monetary unit of another country (for example, £1 = 2.1511 rubles; USA $1 = 5.1732 Swedish kroner). In every country except Great Britain direct quotation is used, under which the exchange rate is established for one unit (or for 100 or for 1,000 units) of foreign currency in the national currency of the given country. In Great Britain reverse quotation is used: the exchange rate is established for £1 in foreign currencies.

Monetary payments are made according to the rate of exchange between countries linked by international economic, political, and cultural relations (transactions in the purchase, sale, and exchange of currency for payments in foreign trade, in the transfer of capital, and so on). The level of the exchange rate under the gold standard was determined by gold parity—that is, by the relationship between the gold content of the monetary units of the appropriate countries and fluctuations in the exchange rate (within the limits of the gold points) generated by the condition of the balance of payments. Under the system of paper-money circulation and inflation that are characteristic of the epoch of the general crisis of capitalism, the level of the exchange rate depends on the degree of depreciation of money with respect to gold or to goods—that is, on the purchasing power of paper money) and on the demand for and supply of the given currency, which also depends on the condition of the country’s balance of payments. Also of great importance to the exchange rate is confidence in a currency and in its stability.

In the conditions of state-monopoly capitalism, the governments of capitalist countries seek to regulate the exchange rate. In the 1930’s the governments of many countries strove to lower the exchange rate of their currencies so as to make the country’s goods more competitive in foreign markets and thereby stimulate exports (currency dumping). Under the charter of the International Monetary Fund, which was created after World War II (1939-45), the member countries of the fund are required to establish, in coordination with the fund, the gold content of their national currency and its parity rate with respect to the US dollar and not to permit deviations from it of more than 1 percent in either direction. Despite this, however, most of the fund’s member countries were compelled to devalue their currencies, and some countries did so several times. Manipulations of the exchange rate are frequently utilized by the imperialist powers to obtain additional profits on the basis of a nonequivalent exchange with other countries, especially developing ones.

Foreign currency is purchased by banks, which are the chief intermediaries in the currency market, at a somewhat lower exchange rate (buyers’ rate) than it is sold at (sellers’ rate). The difference between these rates (the margin) constitutes the bank’s income in currency operations.

In socialist countries the parities of foreign currencies are established with consideration of the comparative purchasing power of money with respect to goods and services. Changes in the exchange rates of the currencies of capitalist countries as expressed in the currencies of socialist countries (currency quotations) reflect fluctuations in the exchange rate of foreign money in foreign currency markets. Payments related to foreign trade between socialist countries that are members of the Council for Mutual Economic Assistance are made in convertible rubles and, with other socialist countries, on a clearing basis in rubles. Every socialist country has established an official rate for the convertible or clearing ruble in its own currency. In payments on nontrade operations between socialist countries, markups or mark-downs on the official rate that are coordinated between the sides are used; these payments are computed on the basis of retail prices for consumer goods and services. Full equivalence is thereby achieved in nontrade payments, and it supplements the equivalence in foreign-trade payments, which is ensured by the coordinated stable prices of the world socialist market.

M. G. POLIAKOV

exchange rate

i. The ratio of enemy losses to one's own, especially in air combat.
ii. The conversion factors assumed and used in calculating the influence of variable aircraft performance.
iii. The conversion ratio between two different currencies.
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