{"id":33333,"date":"2015-06-08T16:48:05","date_gmt":"2015-06-08T16:48:05","guid":{"rendered":"http:\/\/vskills.in\/certification\/blog\/?p=33333"},"modified":"2024-04-03T13:17:51","modified_gmt":"2024-04-03T07:47:51","slug":"exchange-rate-mechanism","status":"publish","type":"post","link":"https:\/\/www.vskills.in\/certification\/blog\/exchange-rate-mechanism\/","title":{"rendered":"EXCHANGE RATE MECHANISM"},"content":{"rendered":"<p style=\"text-align: center\"><a ref=\"magnificPopup\" href=\"http:\/\/vskills.in\/certification\/blog\/wp-content\/uploads\/2015\/06\/EXCHANGE-RATE-MECHANISM.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-33361\" src=\"http:\/\/vskills.in\/certification\/blog\/wp-content\/uploads\/2015\/06\/EXCHANGE-RATE-MECHANISM.jpg\" alt=\"EXCHANGE RATE MECHANISM\" width=\"259\" height=\"194\" \/><\/a><\/p>\n<p><strong>Exchange rate:<\/strong><\/p>\n<p>\u0097The rate at which one currency is converted to another currency is called the Exchange Rate.\u00a0When foreign currency is a constant and is expressed in terms of domestic currency as a variable, it is called a Direct Quote.<\/p>\n<p>\u0097E.g. USD 1 = Rs.61.75<\/p>\n<p>\u0097Indirect Quote is when it is given as Rs.100=USD 1.62<\/p>\n<p><strong>Two way Quotes:<\/strong><\/p>\n<p>\u0097Banks give a two way quote as under:<\/p>\n<p>\u0097USD 1 = 61.65 \u2013 61.80<\/p>\n<p>\u0097This means the Bank will buy USD from the customer at Rs.61.65 per dollar and sell to him at Rs.61.80 per dollar.\u00a0This is called the Bid-Ask Rate.\u00a0Bid means the market maker is prepared to pay so much money for buying the foreign currency.\u00a0\u0097Ask means he is prepared to sell foreign currency at the quoted rate<\/p>\n<p><strong>Cross Rates:<\/strong><\/p>\n<p>\u0097If rates for one currency is not available against another currency, the rate between them is obtained by using an intermediary currency.\u00a0The rate thus obtained is called a <b>\u2018CROSS RATE\u2019.\u00a0<\/b>The principle applied for getting the cross rate is called the chain rule.\u00a0\u0097Let us assume that we do not have EUR\/INR rate, but we have USD\/INR rate and can obtain EUR\/USD rate from New York market<\/p>\n<p>\u0097USD 1 = Rs.62.3300 \u2013 62.3500 in Indian Market<\/p>\n<p>\u0097EUR 1 = USD 1.0904 \u2013 1.0907 in New York Market<\/p>\n<p>\u0097EUR\/INR rate would be:<\/p>\n<p>\u0097Buying Rate: EUR 1 = INR 1.0904*62.33 = 67.964632<\/p>\n<p>\u0097Selling Rate:\u00a0 EUR 1 = INR 1.0907*62.35 = 68.005145<\/p>\n<p><strong>Merchant Rates:<\/strong><\/p>\n<p>\u0097Purchase and Sale transactions are done with exporters, importers and other clean remittance customers on the basis of <b>\u2018MERCHANT RATES\u2019.\u00a0<\/b>Every Bank gives out its own Merchant Rates for all freely convertible currencies.\u00a0Rates follow the pattern as under<\/p>\n<ul>\n<li>\u0097TT Buying<\/li>\n<li>TT Selling<\/li>\n<li>\u0097Bill Buying<\/li>\n<li>Bill Selling<\/li>\n<li>\u0097TC Buying<\/li>\n<li>\u0097Currency Buying<\/li>\n<li>\u0097Clean Cheque Purchase<\/li>\n<\/ul>\n<p><a href=\"http:\/\/www.vskills.in\/certification\/accounting-banking-and-finance\">Click here for government certification in Accounting, Banking &amp; Finance<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Exchange rate: \u0097The rate at which one currency is converted to another currency is called the Exchange Rate.\u00a0When foreign currency is a constant and is expressed in terms of domestic currency as a variable, it is called a Direct Quote. \u0097E.g. USD 1 = Rs.61.75 \u0097Indirect Quote is when it is given as Rs.100=USD 1.62&#8230;<\/p>\n","protected":false},"author":1184,"featured_media":33361,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_joinchat":[],"footnotes":""},"categories":[1519],"tags":[4291,4289,4290],"class_list":["post-33333","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-banking-and-finance","tag-cross-rates","tag-exchnage-rate","tag-merchant-rates"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>EXCHANGE RATE MECHANISM - Vskills Blog<\/title>\n<meta name=\"description\" content=\"Read on to know how the exchange rate mechanism works. Apply for a Vskills certification in Accounting, banking and finance now. 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