The Exchange rate is the price at which currencies are exchanged. Exchange rates are quoted in currency pairs to compare the value of one currency against the other. Exchange rates are a sign of economic strength between two countries with the weaker currency holder requiring more units to acquire the stronger currency.
Exchange rates fluctuate based on their supply and demand. Higher demand for a currency results in a higher value. Economic performance, political environment, and monetary policy influence the value of currencies. The currencies of countries with well-performing economies have a higher exchange value than those with weaker economies.
Stable political environments enable economic growth and attract foreign direct investment into countries, raising the local currency’s demand and boosting the exchange rate. Central bank implementation of monetary policy may strengthen or weaken exchange rates depending on the country’s economic objectives.
Exchange rate volatility is a key factor in investment decisions. Countries with stable currencies, less volatile exchange rates, and predictable returns based on interest rate adjustments attract more investment. Exchange rate stability influences investment decisions because exchange rates influence the price of exports and imports, determine market demand, and influence consumer behavior.
What Is Exchange Rate?
The Exchange rate is the value at which one currency is exchanged with another. The exchange rate represents how much of a certain currency is needed to purchase a unit of a different currency. The exchange rate is expressed in pairs to show the relationship between the currencies.
Exchange rates are quoted in two prices, a bid and an ask price. The bid price is the maximum value buyers are willing to purchase the currency, while an ask price is the minimum price a seller is willing to accept. The difference between the bid and ask price is referred to as spread and it represents the currency’s liquidity and the cost of trading it. A narrow spread represents high liquidity.
Exchange rates are categorized into floating, fixed, nominal, real, and cross rates. Floating exchange rates are exchange rate values that vary based on supply and demand, while fixed exchange rates are set by a government and are pegged to another stronger currency to maintain stability. Nominal exchange rates are the actual values of a currency in the Forex market, while real exchange rates are the nominal rates adjusted for inflation and other variables that determine a currency’s purchasing power. Cross rates are the exchange rates of a currency based on a different currency from the one being exchanged.
Market sentiment affects exchange rate values. Traders’ perceptions and future expectations determine the valuation of exchange rates. High demand for a currency strengthens its value against other currencies. The exchange rate is one of the key FX terms Forex traders need to master to understand their impact on Forex trading.
Governments and central banks worldwide implement economic interventions to influence the value of their currency. Interest rate re-evaluations and currency mopping are central bank policies that help push currency values in the direction that the government desires.
Economies with higher exports than imports will have positive trade balances and stronger currencies which imply strong economic performance and higher exchange rates. The currencies of countries with high productivity have high demand and high exchange rates. Low demand for currencies results in weaker exchange rates.
How Do Exchange Rates Fluctuate?
Exchange rates fluctuate with the supply and demand of the currency. High demand corresponds to higher exchange rates while high supply results in lower exchange rates. The supply and demand of currencies are impacted by interest rates, economic growth, market sentiment, inflation, and trade balances.
High interest rates increase demand for a currency against other currencies which results in high exchange rates. High interest rates attract investors looking for better returns which increases the demand for a currency and its exchange rates. Low interest rates imply lower investment returns which leads to low demand for the currency and weaker exchange rates.
Growing economies attract investors which increases demand and results in higher exchange results. Contracting economies have fewer investors, low demand for their currencies, and weak exchange rates.
Positive country perceptions due to political stability or economic growth result in exchange rate appreciation. Negative perceptions cause exchange rates to fall. The perception of a country depends on the news about economic data, election results, and other economic factors it produces.
Excessive importation leads to trade deficits as it increases net outflows compared to inflows. Countries increase the supply of their currency when they expend more of it to import goods which leads to a depreciation in the exchange rate values.
Central banks increase or reduce the supply of money by printing more money or taking it out of the economy by borrowing from it. Higher supply lowers exchange rates while a drop in supply causes exchange rate appreciation.
What Factors Drive Fluctuations In Exchange Rates?
The factors that influence exchange rate fluctuations are listed below.
- Interest rates: High interest rates increase currency demand and attract foreign investors which leads to higher exchange rates. Low interest rates decrease currency demand and investment attractiveness resulting in low currency valuations.
- Inflation: Inflation affects the purchasing power of currencies. Currencies with high purchasing power enjoy high demand which enhances their value and exchange rate against foreign currencies.
- Current account balances: Countries with positive current account balances tend to have high exchange rates. The current account balance or trade balance refers to the difference in the value of exports and imports in a country. Positive current account balances indicate that countries export more than they import which leads to higher demand for their currency and stronger exchange rate valuations.
- Political stability: Politically stable countries attract investors leading to high demand and exchange rates for their currencies while unstable countries have low investment rates and low currency demand and exchange rates. Political instability lowers investor confidence and currency valuation.
- Central bank interventions: Central banks use foreign currency reserves to buy or sell local currency to strengthen or weaken exchange rates. Central banks buy local currencies to lower supply which boosts exchange rate valuations and sell to increase its supply which weakens exchange rates. Central bank interventions help stabilize the economy and volatility.
- Speculation: Speculative activities in the Forex markets affect currency demand and cause exchange rate fluctuations. The higher the demand the higher the exchange rate value and volatility, while the lower the demand the lower the exchange rate.
- Government debt: Government debt affects investor perception of a country. The less debt a country has the more economically stable it is considered which causes exchange rates to rise. Countries with excessive debt dissuade investment which reduces demand and lowers exchange rates.
- Global crisis: Disasters, pandemics, wars, and other adverse events result in a demand surge for safe currencies which increases their exchange rate valuation and causes the exchange rate of low-demand currencies to fall.
What Are The Types of Exchange Rates?
The types of exchange rates in the market are listed below.
- Floating exchange rate.
- Fixed exchange rate.
- Managed float exchange rate.
Floating Exchange Rate
A floating exchange rate is a currency exchange rate value determined by market forces of supply and demand instead of the government. Floating exchange rates fluctuate according to supply and demand dynamics, and central banks may intervene to stabilize excess volatility.
A floating exchange rate works by responding to market and economic forces. Factors that affect how a floating exchange rate works include supply and demand, market reactions to economic conditions, speculation, and central bank activities. Floating exchange rates rise when there is high demand for the currency and fall as demand drops. Growing economies increase demand for a currency which strengthens floating exchange rates.
Speculative trading causes fluctuations in floating exchange rates as high demand results in valuation spikes while low demand causes value drops. Central banks intervene to manage floating exchange rates when market movements cause volatility in the exchange rate value. Central banks implement monetary policies that will help maintain the floating exchange rate in a stable range.
The difference between floating exchange rates and other types of exchange rates is based on price determination methods, flexibility, economic strength, and central bank interventions. Market forces of supply and demand determine the value of a floating exchange rate with high demand resulting in higher currency valuations. Floating exchange rates have high flexibility and volatility since they follow market movements and economic growth leads to stronger floating exchange rates. Floating exchange rates require little central bank intervention since the price is determined by market forces unless volatility affects the local economy.
The advantages of floating exchange rates include automatic adjustments, monetary policy independence, fewer currency reserves, and an economic shock absorber. Floating exchange rates automatically adjust to the state of the economy. When the economy is strong, the exchange rate value is high and when the economy weakens, the exchange rate falls to stimulate demand. Floating exchange rates enable central banks to implement monetary policy to tame inflation and leave the exchange rate to market forces allowing for better responses from the economy.
Central banks require fewer foreign exchange reserves to control the value of the floating exchange rate since it responds to market movements. A floating exchange rate helps countries absorb economic changes. Floating exchange rates fall in a weak economy which makes exports cheap. Low prices increase product demand which results in economic growth and spikes in exchange rate values.
The disadvantages of a floating exchange rate are high volatility, speculative attacks, and inflation potential. Currency markets are highly volatile and may cause uncertainty in the price of exported products. Speculative trading attacks may lead to rapid and wide fluctuations that may affect economic stability. The fall in floating exchange rate values may cause prices of imported goods to rise and lead the economy to inflation.
The United States of America, European countries, and the United Kingdom are countries whose currencies USD, EUR, and GBP run on floating exchange rates.
Fixed Exchange Rate
A fixed exchange rate is a currency exchange rate value that depends on the value of another stronger currency, group of currencies, or a commodity such as gold. Fixed exchange rates reduce fluctuations, offer predictability, and ensure that currency values remain stable through significant central bank involvement.
Fixed exchange rates work because central banks designate the value of a currency and create policies to maintain the exchange rate within a narrow range. Central banks maintain fixed exchange rates through monetary policies and through the purchase of substantial foreign currencies on which the local currency is pegged. Central banks increase the supply of local currency whenever demand rises enough to cause exchange rates to rise, or buy it off the market when inflation rates rise.
The difference between fixed exchange rates and other exchange rates is based on their determination, central bank role, stability, and foreign currency reserve requirements. Fixed exchange rates are set and controlled through government or central bank intervention while floating exchange rates are determined by supply and demand forces. Fixed exchange rates depend on central banks to maintain them in a narrow range to enhance stability while floating exchange rates fluctuate with the market. Sufficient foreign reserves in the central banks are essential to maintain fixed exchange rates while they are not necessary for floating exchange rates.
The advantages of fixed exchange rates are stability and predictability, control of inflation, attracting foreign investment, and encouraging disciplined fiscal policy. Fixed exchange rates keep currency values stable and help to reduce uncertainty for businesses and consumers. Fixed exchange rates help to keep inflation low since the local currency is based on a more stable currency. The stability of fixed exchange rates and the promise of stable returns attract foreign investors. Central banks exercise systematic fiscal control to maintain fixed exchange rate values to enhance economic stability and eliminate excessive volatility.
The disadvantages of fixed interest rates are the need for large reserves, limited monetary policy, and the risk of economic imbalance. Fixed exchange rates require central banks to keep large reserves of foreign currencies to maintain the rates when demand surges. Fixed exchange rates limit the capacity of central banks to deal with economic issues as they focus on sustaining the exchange rate by a narrow margin. Fixed exchange rates may cause economic imbalances if the peg currency grows stronger affecting the price and competitiveness of exports from the local economy.
China, Hong Kong, Saudi Arabia, and UAE are prominent countries that implement a fixed exchange rate.
Managed Float Exchange Rate
A managed float exchange rate is a currency value that relies on both market forces and central bank intervention to maintain value and stability. A managed float exchange rate is also known as a dirty float.
A managed float exchange rate relies primarily on market movement and occasional central bank interventions to control volatility and align the exchange rate to economic fundamentals. Central bank interventions are necessary to enhance economic stability when fluctuations in exchange rates affect trade and investment. Managed float exchange rates provide flexibility due to market movements and stability as governments may intervene when necessary.
The difference between managed float exchange rates, fixed, and floating exchange rates are based on determination, stability, central bank role, and monetary policy. Managed float exchange rates are determined by a combination of market forces and government intervention, while fixed exchange rates are determined solely by the government, and floating exchange rates are solely determined by market forces. Floating exchange rates have lower stability compared with fixed and managed float exchange rates which require government intervention to maintain stability. Managed float exchange rates and fixed exchange rates require central bank and monetary policy intervention while floating exchange rates are determined independent of the local governments.
The advantages of a managed float exchange rate are protection against economic shocks, elimination of the need for excessive foreign currency reserves, balance of stability and flexibility, and the use of independent monetary policy. Managed float exchange rates protect economies from external shocks by the involvement of central banks to control prices when demand for the currency increases. Managed float exchange rates reduce a country’s expenditure on foreign currency to support its local currency since interventions are minimal and subtle.
Managed float exchange rates ensure flexibility and stability since they vary with market movements and central banks intervene to keep the rate from excessive spikes or drops. Managed float exchange rates enable countries to implement monetary policies to curb inflation or interest rates while keeping exchange rates under control.
The disadvantages of managed float exchange rates are market uncertainty, ineffective interventions, and central bank perceptions. Managed float exchange rates may suffer uncertainty due to the unpredictability of government interventions. Central bank interventions may fail to meet market rate expectations which affects investor confidence based on their perceptions of the capabilities of the central banks.
India, Singapore, Brazil, and Russia are some countries that implement managed float exchange rates.
How Do Exchange Rates Affect The Supply And Demand Of Goods?
Exchange rate fluctuations affect the supply and demand of goods by making them cheaper or more expensive. Strong exchange rates result in high purchasing power which leads to cheaper imported goods increasing their supply and expensive exports which reduce demand. Weak exchange rates make imports more expensive lowering supply and demand.
Goods produced in a country with low exchange rates are cheaper to foreign buyers which increases their demand. High exchange rates increase the prices of exported goods, which lowers their demand. For example, if the American dollar weakens against the Euro, American exports become more affordable in Europe which leads to higher demand while European goods become more expensive to Americans lowering demand in America.
Imported goods become more costly in countries with low exchange rates reducing their supply. The high price of imports reduces their demand and may increase the supply of locally manufactured goods. For instance, if the British pound weakens against the US dollar, US imports become more expensive which causes Brits to look for cheaper locally manufactured alternatives. The high price of American products causes a drop in demand which results in lower acquisition rates and supply in the British market.
What Is Exchange Rate In Forex Trading?
Exchange rate in Forex trading is the price at which one currency is exchanged for another. It represents how much of a single currency is required to buy another. Exchange rates in Forex trading are quoted in currency pairs and reflect the relative value of one currency against the other. Exchange rates assist traders pick the currency pairs to trade.
Exchange rates in Forex trading are expressed in currency pairs such as EUR/USD. The first currency is known as the base currency and the second currency is the quote currency. The exchange rate on a currency pair indicates how much of the quote currency is required to buy one unit of the base currency. An increase in currency pair exchange rates signifies the rising strength of the base currency, while a decrease represents the strengthening of the quote currency.
Exchange rates are quoted with two prices, a bid price, and an ask price. The bid price is the price at which traders sell the base currency while the ask price is the purchase price of the base currency. The difference between the ask and bid price of a currency pair is known as spread which is measured in pips and represents the cost of trading the currency pair.
The most common type of exchange rates in Forex markets are floating rates. Floating exchange rates fluctuate according to supply and demand in the market as opposed to fixed exchange rates set by governments.
Exchange rates in Forex trading are characterized by volatility. High-volatility currency pairs experience large price fluctuations while less volatile currency pairs experience low fluctuation rates.
Various factors in the Forex market, such as interest rates, inflation, geopolitical factors, and central bank interventions, impact exchange rates. These factors determine trader activity and the supply and demand of currencies which are reflected in currency pair exchange rate value fluctuations.
Exchange rates in the Forex markets are time-sensitive and impacted by real-time information and market sentiment affecting specific currencies. Exchange rates fluctuation provide profit opportunities for Forex traders.
How Do Exchange Rates Affect Trading Decisions In The Forex Market?
Exchange rates affect trading decisions directly since their movements determine profitability. For instance, Forex traders make a buy decision on a particular currency when they expect a spike in exchange rates and sell decisions when they expect a depreciation. FX traders consider exchange rates to decide on currency pair selection, market entry strategies, risk management, leverage, and trading strategies to implement.
Exchange rates determine the popularity of currency pairs and influence Forex traders’ decisions on the currency pairs they choose to trade. When Forex traders expect the American dollar (USD) exchange rate to strengthen against the Japanese Yen (JPY) they will buy USD/JPY.
Forex traders make market entry decisions based on exchange rate fluctuations. Forex traders enter the market at the lowest price level when exchange rates are expected to rise and exit when they deliver expected profits. Forex traders make sell decisions when exchange rates are expected to fall and enter the market at the highest price value at the time of trading and exit after an exchange rate drop.
Exchange rate volatility requires traders to implement risk management strategies that prevent significant losses. Forex traders use stop-loss orders to limit losses if their predictions fail and a take-profit order which allows them to exit a successful trade profitably before volatility causes a reversal. Exchange rate fluctuations determine stop-loss and take-profit levels.
Forex traders assess exchange rate fluctuations to decide on leverage levels. Changes in exchange rates may lead to profits or losses and leverage will impact the extent of gain or loss. Exchange rate movements help Forex traders determine how much leverage to accept from their foreign exchange brokers.
Exchange rate movements cause traders to implement appropriate trading strategies such as trend following, pullback strategy, or breakout trading depending on their direction and intensity.
How Is The Exchange Rate Determined In Currency Markets?
The exchange rate in currency markets is determined by supply and demand forces. High demand results in high exchange rate prices while high supply causes exchange rates to fall. Exchange rate values in currency markets are affected by economic data releases, central bank policies, interest rates, geopolitical events, and market sentiment.
Forex traders anticipate economic data releases to predict exchange rate movements and to determine their trading decisions and strategies. Economic data shows the strength of an economy in terms of GDP, employment statistics, inflation, and consumption or purchasing rates. Positive economic news strengthens the exchange rates and increases currency demand while negative economic data weakens exchange rates and causes traders to sell them in expectation of poor returns.
Central bank activities such as raising interest rates and quantitative easing or tightening decisions boost or weaken exchange rates to cause a significant impact on currency demand in currency markets. For example, central bank decisions to increase the supply of a currency through quantitative easing weaken its exchange rate value and result in low demand in the market.
An increase in interest rates indicates confidence in the economic outlook which attracts investors, increases currency demand, and results in higher exchange rates and profitability in the Forex market.
Geopolitical events have a significant influence on exchange rates in currency markets. Positive geopolitical events such as economic growth, growing regional partnerships, or successful elections enhance the perception of countries, attract investors, increase Forex market demand, and strengthen exchange rate values. Negative geopolitical events such as war, trade, or diplomatic disputes weaken economies and cause drops in exchange rates and investor attraction. Forex traders are keen on geopolitical news to help determine their trading strategies for different currencies.
Positive market sentiment for a particular currency causes it to strengthen against others. Positive market sentiment for the quote currency boosts the value of every currency pair it features and increases asset prices, market activity, and profitability in the currency market. Institutional investors determine market sentiment based on their market activity. Increased buying activity by institutional investors results in bullish sentiment and higher exchange rates while their selling activity leads to bearishness and low exchange rates.
What Role Do Exchange Rates Play In International Trade And Finance?
Exchange rates determine the price of goods, affect investment in different countries, and help to make economic policy decisions for international trade and finance. Exchange rates impact the price of exports and imports, trade balances, investment decisions, inflation, and monetary policy.
Goods exported from a country are cheaper and enjoy high demand in foreign markets when its country’s exchange rate weakens, while its imports become more expensive. Weaker exchange rates help to promote local investment, reduce reliance on imported goods, boost the local economy, and improve trade balances. Stronger exchange rates increase the price of exports in foreign markets and imports become cheaper which results in a trade deficit.
Exchange rates affect the trade balances of a country since they determine the value of exports and imports. Strong exchange rates cause exports to be more expensive while imports become cheaper. A country with weaker exchange rates may enjoy a trade surplus as its exports are more affordable and may have high demand in foreign countries while imports are more expensive.
Countries with stable exchange rates, and those whose exchange rates are likely to strengthen, easily attract investment. Countries with uncertain economic and political environments struggle to attract investment. Favorable economic conditions and interest rate hikes help strengthen exchange rates and attract foreign direct investment into a country.
Weak exchange rates increase the price of imports which leads to high prices and inflation in the local market. Expensive products affect purchasing power and availability of essential services and products. Central bank interventions become necessary to stabilize prices and limit inflation.
Exchange rates are a key central bank consideration in the development of monetary policy. Central banks increase and adjust interest rates to control exchange rate fluctuations to support economic growth by attracting investors and making exports more competitive to increase demand.
How Do Exchange Rates Impact Global Economic Indicators?
The impact of exchange rates on global economic indicators depends on their strength. Strong exchange rates negatively impact global economic indicators by making exports more expensive and imports cheaper which results in trade deficits. Weak exchange rates boost exports and make imports expensive which results in a trade surplus.
Weak exchange rates increase inflation. Inflation occurs when price rises are accompanied by limited supply. Weak exchange rates cause the price of imports to spike and reduce availability, increasing inflation in the economy. Central bank interventions help strengthen weak exchange rates to minimize the adverse effects of inflation on the economy.
The relationship between exchange rates and global economic indicators may lead to currency wars. Currency wars are when countries deliberately devalue their currencies to gain a competitive advantage in international markets. Weaker exchange rates make exports cheaper, which increases demand and helps exporting countries boost their economies and gain a trade surplus. Weaker exchange rates also provide affordable production environments, which increase investment and help grow the economy.
Countries achieve a weaker exchange rate through monetary policy that designates a fixed exchange rate lower than the currency’s intrinsic value or central bank interventions such as interest rate adjustments or quantitative easing to increase currency supply and lower its exchange rate.
What Are The Implications Of Changes In Exchange Rates For Businesses And Customers?
The implications of exchange rate fluctuations on businesses and customers are listed below.
- Cost and pricing of goods: Exchange rate fluctuations affect the cost of production and price of goods. Weakening exchange rates raise the price of imported raw materials to increase the cost of production and the selling price of the final product.
- Market demand: A fall in exchange rate values makes imported products more expensive and lowers market demand as customers opt for cheaper locally produced goods. A rise in exchange rates increases demand for imported products as they are more competitively priced compared with local products.
- Revenue and profits: Business revenue and profits for companies earning in foreign currency fall when the domestic currency of exchange rates strengthens. These businesses utilize hedging as a currency risk management strategy to guard against losses caused by currency fluctuations.
- Foreign investment decisions: Businesses consider exchange rate fluctuations when expanding internationally. Businesses prefer countries with stable interest exchange rates over uncertainty and high volatility.
- Purchasing power: Strong local currencies increase customer purchasing power as imported goods are cheaper while weak currencies cause high prices of goods which impedes the purchasing power of customers.
- Consumer behavior: Weakening currency values cause the prices of goods to rise and impact consumer perceptions of value. Consumers will opt for cheaper alternatives or delay purchasing decisions until they believe that their purchase delivers value for money.
- Impacts savings and investment: Currency fluctuations cause foreign-denominated holdings to lose value when the local currency strengthens or gain value when exchange rate depreciations occur.
What Are Examples Of Exchange Rate Movements And Their Effects?
Prominent examples of exchange rate movements and their effects on international trade include the depreciation of the Japanese Yen (JPY) against the American dollar (USD), the British Pound (GBP) volatility due to Brexit, and the 1997-1998 Asian financial crisis.
Depressed economic conditions in Japan have caused its currency, JPY, to fall. The weakening of the Japanese Yen (JPY) has helped Japan by making its exports cheaper and increasing Japan-made products for their competitive pricing. Japanese customers have more expensive imports due to their weak currency.
The British Pound (GBP) depreciated against top currencies during the Brexit campaign in 2016. The GBP depreciation increased the demand for British goods in foreign countries and enhanced tourism as a visit to Britain became much cheaper for foreigners whose currencies were stronger than the GBP.
The 1997-1998 Asian financial crisis caused the devaluation of the Thai baht after speculative attacks. The effects of this currency depreciation were experienced in neighboring countries, Malaysia, South Korea, Indonesia, and Indonesia. The currency depreciations caused bankruptcies, falling stock market prices, and economic contraction in all affected countries.
Does The Exchange Rate Change In A Currency Peg?
Yes. The exchange rate in a currency peg may fluctuate against the currency it is pegged. Central banks are involved in exchange rate adjustments in a pegged exchange rate system. The weakening of the exchange rates against the pegged currency causes central banks to respond by buying its local currency to reduce supply and increase its value. Central banks sell the local currency to increase its supply and lower its value when it strengthens against its pegged currency.
A pegged exchange rate system is when the value of a currency is fixed or determined against another superior currency, commodity, or basket of currencies. According to currency peg definition, it is not apparent that the pegged currency fluctuates once set. A currency peg system requires the active involvement of the central bank which must have sufficient foreign reserves to stabilize the local currency.
Does Quantitative Easing Affect Exchange Rate?
Yes, quantitative easing weakens exchange rates since it works by increasing the supply of money to stimulate the local economy.
Quantitative easing is a monetary policy tool implemented by central banks through the purchase of government securities and the adjustment of interest rates to increase the supply of money in an economy. The objective of quantitative easing is economic stimulation during periods of stagnation by making credit available to increase productivity and consumption.
Quantitative easing is a deliberate devaluation of a currency to increase competitive advantage in international trade. Countries weaken their currencies which may result in currency wars as they compete to make their products more affordable, according to the quantitative easing definition.
What Is The Difference Between The Exchange Rate And The Cross Rate?
An exchange rate is defined as the price at which one currency is exchanged for another, while the cross rate is the value of exchanging two foreign currencies that are not the official currencies of the country where they are exchanged.
Exchange rates and cross rates have different uses. The exchange rate is used for local transactions while cross rates are used for international trade. Cross rates are also used in Forex trading.
The quoting location of exchange rates and cross rates are different. Exchange rates are quoted in comparison to local currencies while cross rates are compared against two foreign currencies without the involvement of a local currency, as per cross rate definition.
The value of an exchange rate depends on its supply and demand. High demand increases the value of a currency, while high supply depreciates it. A cross-rate value is calculated for two foreign currencies depending on the value of an associated major currency.
Exchange rates are more common in local trading while cross rates are used for professional international trading. Exchange rates are readily accessible to everybody while cross-rates are a preserve of traders.