The exchange rate represents the value of one currency in relation to another. It determines how much of one currency can be exchanged for another, impacting international trade, investments, and cross-border financial activities.
Simple Example: XYZ Corp is expanding into Mexico and needs to pay a supplier in Mexican pesos (MXN). They have $100,000 in U.S. dollars (USD) and plan to convert this amount at the current exchange rate.
Numerical Breakdown:
The current USD/MXN exchange rate is 20.1234, meaning 1 U.S. dollar equals 20.1234 Mexican pesos.
