What is an exchange rate? What factors determine the exchange rate for the Australian dollar? An exchange rate is the ratio at which a country's currency exchanges for the currency of another country. Exchange rates are typically expressed as the foreign currency equivalent of one unit of domestic currency. The exchange rate between Australia and the United States for example was $A1.00 = $US0. , (as of 2.12.99). The exchange rate is determined by the demand for, and supply of, that currency in terms of other currencies. The major trading countries of the world use a system of floating exchange rates. Under this system, exchange rates are determined by the free market forces of supply and demand. In other words, the rate moves freely in response to competitive market forces. Demand and supply are determined in terms of overseas currencies. Those who ....

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