Foreign exchange rate
The foreign exchange rate between two currencies which tell how much one currency is worth in respect to other. It is price at which one currency trades for another. It is also called as forex or FX rate. Foreign Currency rates are only applicable when they are written in currency pairs. The currency written on left is named as referred and the right one is named as quote currency. For example if we want to covert US dollar into Australian dollar then the US dollar would be placed on left and is called the base currency.
If the currency pair does not compare with Britain pound, euro, Australian dollar or US dollar, the forex market consider the currency as base whose exchange rate is more than one.
There are two types of exchange rate; 1st one is the spot exchange rate- the current rate which is instantly applicable and the other one is term forward rate- exchange rate is used for trading and is recently quoted.
There are two methods of calculating foreign exchange rate which are:
Forecasting foreign exchange rate using fundamental approach needs many economic variables such as GNP, trade balance, inflation rates, unemployment, consumption and productivity. It takes into account statistical characteristics of data collection. It is done when there is significant difference between the expected exchange and current rate. The technical approach for calculating is always better than this because it gives accurate results as it has to evaluate smaller sub-sets. The basic help of technical approach is to eliminate or filter daily fluctuations so that you can determine the lasting changes and indicator.