Exchange rate

Exchange rate, rate at which one country's currency is valued in terms of another's. For instance, at a given time a British pound may be worth $1.50. If the exchange rate were to become $1.60, British imports in the United States would become more expensive. Floating exchange rates, which prevail today, allow the relative values of currencies to fluctuate on the free market, although governments intervene to prevent extreme rises and falls. In the late 19th and early 20th centuries, most currencies did not float but were valued in gold under the international gold standard. After World War II, most currencies were valued in terms of the U.S. dollar, which was convertible for gold. In the 1970s, however, President Nixon ended this system, thus inaugurating floating rates.