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| Source: wn.com |
Exchange Rate is the price of one country's currency expressed in another country's currency (investopedia.com). In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one dollar in terms of one peso, the lower the relative value of the peso.
In matters concerning exchange rate, we usually relate it to the currency of a country. Currency is a type of money in which shares of investments are bought and sold. This is not necessarily the same currency in which this investment purchases securities (www.businessdictionary.com). For example, an international mutual fund bought in the United States is traded in dollars ($), however the mutual fund may own many different international securities, spanning several currencies. The assigned currency for such an investment is still dollars ($), since that is the currency in which the investment is bought and sold by an investor.
There are a lot of factors that influence exchange rate, it includes (1) interest rates, (2) inflation rate, (3) trade balance, (4) political stability, (5) internal harmony, (6) high degree of transparency in the conduct of leaders and administrators, (7) general state of economy, and (8) quality of governance (Duarte,1997). The Philippine Peso has been influenced by these factors and we’ve been through tough times in edging down against the US Dollar.
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