Question

Give the various types of exchange rate?

Answer 1

1. Fixed exchange rate: The government decides the value of the currency. It stays the same and doesn’t change with market ups and downs.
2. Flexible (floating) exchange rate: The currency value goes up or down depending on demand and supply in the foreign exchange market. No government control.
3. Managed floating rate: The rate is mostly decided by the market, but the central bank steps in if the rate changes too much.
4. Multiple exchange rate: A country uses different rates for different things, like one rate for imports and another for tourists. Rarely used now.
5. Spot exchange rate: The rate used when money is exchanged immediately, like within 1–2 days.
6. Forward exchange rate: This is the rate agreed upon today, but the exchange of money happens later in the future.