Question

Mariah Dover cashed her $100 traveler's check in Riga, the capital of Latvia. At the current _____ rate, she received $61.82 in Latvian currency from the bank teller who took her traveler’s check.

Answer 1

Answer:

current floating exchange rate

Explanation:

Exchange rate is the rate at which one currency will be exchanged with another. For example, 1 United States Dollar is equivalent to 4.24 Poland Zloty as of March 2020.

There are two common types of exchange rates:

1. Floating exchange rate: This is set by the FOREX market, and is based on the current supply and demand of currencies. When demand for a currency is high, its value increases and vice versa.

2. Fixed exchange rate: A fixed or pegged exchange rate is whereby a government entirely determines the rate and value of the currency.

Generally, a floating exchange rate system is used in the global market. This does not mean countries allow their currencies to fluctuate endlessly. The central bank of a country and it's government does intervene and manipulate the currency to make it favorable for them during international trade but it is done in a more indirect manner as opposed to a fixed exchange rate system.