The development of the MEO requires a value ratio of currencies of different countries. Therefore, the study of the exchange rate is of great importance. The need for the exchange rate is explained by:
mutual exchange of currencies in the trade in goods, services, in the movement of capital and loans. The exporter exchanges the proceeds of foreign currency into the national one, since the currencies of other countries cannot apply as legal purchasing funds in the territory of this state. The importer exchanges the national currency for foreign currency to pay for goods purchased abroad. The debtor acquires foreign currency for the national one to pay off debt and pay interest on external loans; the need to compare prices of world and national markets, as well as the cost indicators of different countries expressed in foreign currencies; periodic revaluation of accounts in the foreign currency of firms and banks.
Currency rate – the price of the currency of one country, expressed in monetary units of other countries.
This economic category is inherent in commodity production and expresses production relations between producers and the world market.
The exchange rate expresses specific production relations corresponding to different stages of the development of commodity production. In a primitive form, the exchange rate existed even with slaveholding and feudal methods of production, but the greatest development was obtained with capitalism at the time of the formation of the world market. The spontaneous basis of the exchange rate is especially pronounced in conditions of free competition.
In modern conditions, the exchange rate is based on currency parity – the ratio between currencies established by law, and fluctuates around it.
The economic basis of the exchange rate is purchasing power parity, i.e. weighted average price ratio in different countries. At the same time, the objectivity of the comparison can be achieved using a very large number of goods and services included in the conditional consumer basket of the compared countries. However, this method gives only an approximate value, a general guideline for determining exchange rates. The latter can fluctuate under the influence of a large number of factors, far deviating from purchasing power parity. At the same time, the biggest difficulty is the lack of a single way to determine the composition of the consumer basket. In different countries, the structure of goods and services included in it varies significantly, which makes it difficult to compare them.