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What is Exchange Rate Determination Explained about?
Exchange rates are determined by the demand and supply of currencies relative to each other. The law of one price and purchasing power parity theory also influence exchange rates based on relative prices between countries. Interest rate parity theory suggests exchange rates are dependent on differences in interest rates between countries. Exchange rates can be floating based on market forces or fixed by a government against another currency.
- Author
- MOAZZAM SHAIKH
- Language
- EN