The exchange rate is the price of one currency in terms of another and fluctuates depending on several factors (supply, demand, inflation, …).

The exchange rate determines how much of currency X you can get if you offer currency Y. In this way, for example, you can know how much a dollar is equivalent to in euros and vice versa.

With FacturaDirecta you can invoice with any currency. Create an account.

This operation is fundamental to carry out economic transactions between companies that work with different currencies.

Exchange operations (that is, the buying and selling of currencies) can be done through banking entities and also accredited exchange houses.

Classification of exchange rates

Exchange rates can be classified as:

• Nominal exchange rate: It is the price of another currency expressed in monetary units of one’s own currency. A currency will improve its valuation when it obtains the same amount of another currency using less amount of its own currency. It is the exchange rate that is contemplated in banks and exchange houses.
• Real exchange rate: It is the price of one’s own currency with respect to another foreign currency.

Also according to whether they are:

• Variable exchange rate: It is established by the fluctuation of supply and demand in the market.
• Fixed exchange rate: It is established by the Central Bank respectively.
• Cross exchange rates: it is the exchange rate between two currencies that we obtain through the exchange rate that each of them has with a third one.

Other considerations

1- International accounting laws oblige companies that carry out international transactions to:

• Make an annual review of the exchange rates of their assets located in different monetary zones.
• Express the origin value as well as the exchange rate and the value of their own currency in export and import operations of products or services.

2- With exchange rates you can assess the depreciation or appreciation of one currency in terms of another.

3- In the foreign exchange market there is a seller exchange rate and a buyer one. The first is the price at which they are going to sell us those currencies in our financial entity. The second, higher, is the price at which the entity is going to buy the currency from us.

We hope this information is very useful to you.