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Types of exchange rates


Offshore Agent
Mentor Group Gold Premium
Sep 11, 2009
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These are some of the exchange rates which are followed everywhere

1.Fixed and Floating exchange rates

Fixed exchange rate is the official rate set by the monetary authorities of the Governance for one or more currencies.

Under floating exchange rate, the value of the currency is decided by supply and demand factors

2.Direct and indirect exchange rates

Direct method - Under this, a given number of units of local currency per unit of foreign currency is quoted. They are designated as direct/certain rates because the rupee cost of single foreign currency unit can be obtained directly. Direct quotation is also called home currency quotation.

Indirect method – Under this, a given number of units of foreign currency per unit of local currency is quoted. Indirect quotation is also called foreign currency quotation

3.Buying and selling

Exchange rates are quoted as two way quotes – for purchase and sale transactions by the Bank

4.Spot and forward

The delivery under a foreign exchange transaction can be settled in one of the following ways

Ready or cash – To be settled on the same day

Tom – To be settled on the day next to the date of transaction

Spot – To be settled on the second working day from the date of contract

Forward – To be settled at a date farther than the spot date