This document discusses currency exchange rates and their management. It defines currency exchange rates as the price of one nation's currency in terms of another. There are three main types of exchange rate systems: fixed exchange rates, where a government maintains a set rate for a period of time; floating or flexible exchange rates, where the rate is determined purely by supply and demand; and managed floating rates, where a central bank intervenes to influence changes in the exchange rate to smooth fluctuations. The document also explains the concepts of currency appreciation and depreciation in terms of supply and demand and their economic effects.

1. Import Export Procedure and Documentation
Topic:- Currency Exchange Rates and Their Management
IN PARTIAL FULFILLMENT TO AWARD THE DEGREE IN BACHELOR OF BUSINESS
ADMINISTRATION
(BBA-International Business)
SUBMITTED BY
MANSI DEOKAR
(BATCH – 2017 - 2018)
SUBMITTED TO
PROF. ATUL KADAM

2. Contents
 Currency Exchange Rate
 Types of Exchange Rate
 Fixed Exchange Rate
 Floating/Flexible Exchange Rate
 Appreciation
 Depreciation
 Managed Float Exchange Rate

3. Currency Exchange Rate
 The price of a nation’s currency in terms of another currency.
 An exchange rate thus has two components, the domestic currency and a
foreign currency.
 Exchange rate is between two currencies in which one currency will be
exchanged for another.
 For example our domestic currency is the Rupee and the Foreign Currency can
be United States Dollars (USD) or Euros (EUR) just to name a few.

4. Types of Exchange Rate
 We will be exploring three types of Exchange Rates which are:
1. Fixed Exchange Rate
2. Floating/Flexible Exchange Rate
3. Managed Float Exchange Rate

5. Fixed Exchange Rate
 This is where a Government maintains a given exchange rate over a period of
time.
 This could be for a few months or even years.
 Today, most fixed exchange rates are pegged to the U.S. dollar. Countries also
fix their currencies to that of their most frequent trading partners.

6. Floating/Flexible Exchange Rate
 A floating exchange rate regime is where the rate of exchange is determined
purely by the demand and supply of that currency on the foreign exchange
market.
 The value of a currency is allowed to be determined by the forces of demand
and supply on the foreign exchange market. There is no government
intervention.
 An increase in demand for the local currency causes it to appreciate or rise.
However, if there is a greater demand for the foreign currency the value of
the local currency falls or depreciates to the foreign currency.

7. Appreciation
 This could be caused by:
1. A decrease in the number of foreign goods and services imported into the
economy.
2. A decrease in the number of the economy’s investors who want to place their funds
in foreign economies.
Effects of Appreciation:
1. Exports more expensive.
2. Imports are cheaper.
3. Lower Economic Growth
4. Lower inflation.

8. Depreciation
 This could be caused by:
1. A reduction in the number of the economy’s goods and services sold abroad.
2. A reduction in the number of international investors who wish to place their
funds in the economy.
 Effects of Depreciation:
1. Exports cheaper.
2. Imports more expensive.
3. Increased Economic Growth
4. Inflation
5. Improvement in the current account

9. Managed Float Exchange Rate
 This is where the currency is broadly managed by the forces of demand and
supply but the government takes action to influence the rate of change in the
exchange rate.
 Central bank intervenes to smoothen out ups and downs in the exchange rate
of home currency to its own advantage.
 The managed float attempts to combine the advantages of both the fixed and
flexible exchange rate systems, depending on the degree of instability.
 The less instability, the less intervention is necessary by central banks. The
greater the instability, the more intervention is necessary by central banks

10. Thank You….!!!