The exchange rate is an important factor in international trade and capital movements between countries.
When the exchange rate of a currency rises, it becomes stronger in relation to other currencies and fewer units of that currency are needed to buy a certain amount of foreign currency. This makes it cheaper to import goods and services from abroad and more expensive to export them abroad.
Devaluation, on the other hand, causes a currency to weaken relative to other currencies and more units of that currency are needed to buy a given amount of foreign currency. As a result, exporting goods and services from the country becomes cheaper and importing them into the country becomes more expensive.
The exchange rates of currencies are influenced by a variety of factors, such as inflation, interest rate levels, the external trade balance and political events. In many countries, the exchange rate of a currency is fixed by the central bank or the government (fixed exchange rate), while in others it can fluctuate freely (flexible exchange rate).
