what is exchange rate

An exchange rate is the rate at which one currency will be exchanged for another currency. It is the value of one country's currency in relation to another currency. Exchange rates are important in determining trade and capital flow dynamics and are impacted by factors such as economic activity, inflation, and geopolitical events. Most exchange rates are defined as floating and will rise or fall based on the supply and demand in the market, but some are pegged or fixed to the value of a specific country's currency