What is an exchange rate? Calculation and rate types
What is an exchange rate?
An exchange rate expresses one currency’s price in another. If 1 USD costs 2.70 GEL, then 100 USD is equivalent to 270 GEL. In reverse, 270 GEL divided by 2.70 gives 100 USD. This is a calculation example, not the current rate.
Check the quantity as well as the rate: official quotes sometimes cover 10, 100 or 1,000 units. If 100 units cost 3 GEL, one unit costs 0.03 GEL.
Fixed and floating exchange rates
Under a fixed regime, a currency is linked to another currency or reference value and the monetary authority seeks to maintain that link. Under a floating regime, its price changes with market supply and demand.
Georgia uses a floating exchange rate. Currency flows, payments and expectations affect its movement, but no single factor determines the future rate. The National Bank can participate through market interventions.
Official rate versus an exchange quote
The official rate is a reference. A commercial provider sets separate buy and sell quotes; the gap is called the spread. The spread is not the provider’s net profit, because providing the service also has costs.
Check the commercial offer and final amount before exchanging. Correct formulas and units matter even when the rate itself is unchanged.