An exchange rate is the market price at which one unit of currency can be traded for a unit of currency of a different country. Using the market exchange rate, a person can calculate how much of one currency they can buy with a specific amount of their domestic currency.
For example, if the exchange rate for the U.S. dollar and Japanese yen is 1 USD = 76.8 JPY, then $1000 would buy 76,800 JPY. Many people use online currency converters to estimate how much foreign currency they can buy for a vacation or an investment. In the broader terms of the forex market, however, the exchange rate between two currencies is the culmination of buying and selling by forex traders, retail banks, hedge funds, market makers and other participants in the FX market.
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