Exchange Rate

The exchange rate of one currency (a currency) is the value (current price) of this currency expressed in terms of another currency (foreign currency).

We speak of "parity" of a currency and different pairs EUR / USD (exchange rate of euro to dollar), USD / JPY (exchange rate of the dollar in yen), GBP / USD (exchange rate British pound in dollars), etc.., whose prices change from day to day on the international currency market, the Forex.
 
An exchange rate can be floating (which is the case in exchange rates of currencies of major developed countries since 1973 and abandonment of the regime of fixed exchange rates as it had been established by the Bretton Woods 1944) or fixed, that is to say constant relative to a reference currency or a basket of currencies, by decision of the State issuing that currency (see the Chinese currency, the Yuan, whose parity is semi-fixed relative to a reference basket of euro-dollar).
 
If fixed, the exchange rate can be changed by a decision of devaluation (or revaluation) of the State concerned.
 
The modern form of the absolute fixity of exchange rates of a currency is illustrated by the system of "CB" (currency board) that has adopted, for example Argentina (against the dollar), Hong Kong Bulgaria or Lithuania: the issuance of currency in these countries is then fully "collateralized" by currency obtained either by international credits, either by a current account surplus.
 
Regarding the foreign currency relative valuations change depending on supply and demand in the Forex , the variations of these courses are largely a function in the short term, changes in interest rates anticipated from the different countries (and their various central banks ) and the inflation early on in these countries and other major macroeconomic data: changes in trade barriers, fluctuations in demand for goods and even, more generally, the growth anticipated.
 
In the long run, purchasing power parity theory, the value indicated on the most "economically realistic" exchange rates of various currencies to each other: thus the "Big Mac Index", developed by the British weekly The Economist, offers Does the different exchange rates that would allow a Big Mac costs the same in the U.S. and elsewhere.