The exchange rate can be classified on various grounds, according to which it has multiple differentiation:
According to the method of fixing, the fluctuating, floating, fixed exchange rate is distinguished; According to the method of calculation, a parity and actual exchange rate is allocated; By type of transactions, the exchange rate is divided into the rate of urgent transactions, the rate of spot transactions; In relation to the participants in the transaction, the exchange rate is differentiated by the purchase rate, sales rate, average exchange rate, cross-course; The real and nominal exchange rate are allocated for accounting for inflation.
Floating currency the exchange rate is a exchange rate that changes freely under the influence of supply and demand.
The fluctuating exchange rate provides for the linking of market changes with the dynamics of the exchange rates of other countries or the set of currencies and may go beyond the limits established by the international agreement.
Fixed – officially established ratio between national currencies, based on statutory currency parities; involves the consolidation of the content of national currency units directly in gold or in convertible currency, with strict limitation of fluctuations in market exchange rates within 1%.
Parity – the estimated rate in international payment turnover, based on currency parity.
Actual – the course at which sales transactions are made.
The rate of urgent transactions is the exchange rate used in the performance of foreign exchange transactions for a period.
The spot transaction course is exchange prices for cash transactions.
Purchase course (buyer) – the price buyers are willing to pay.
The selling course (seller) is the lowest price at which the buyer is ready to make a deal.
The average course is the arithmetic average between the purchase and sale rates.
Cross-course – the ratio between two currencies, determined on the basis of the exchange rate of these currencies against the third currency, is carried out mainly against the US dollar.
The following main exchange rate regimes are distinguished:
free swimming; controlled swimming; system of fixed rates; system of target zones; hybrid systems.
So, in a free-float system, the exchange rate is formed under the influence of market demand and market supply. Here the foreign exchange market is closest to the model of the market for perfect competition: the number of participants both on the demand side and on the supply side is huge, any information is transmitted instantly and available to all market participants, the distorting role of central banks is insignificant and unstable.
In the system of controlled navigation, in addition to supply and demand, the central banks of countries and other temporary distortions strongly influence the exchange rate.
An example of a fixed exchange rate system is the Bretton Woods currency system 1944-1971. In it, the rates of all currencies were fixed against the dollar with the fluctuation limit +/- 1%. The dollar exchange rate, in turn, was tightly tied to gold: $ 35. USA = 1 triple ounce of gold.
The system of target zones develops the idea of fixed exchange rates, but at the same time the lower and upper boundaries of the exchange rate are established. This system is called the currency corridor. An example is the mode of operation of the exchange rates of the countries participating in the European Monetary System.
Finally, a hybrid currency system combines any of the above exchange rate regimes.