FINANCIAL EDUCATION PLATFORM
By La Rédaction · Port-au-Prince · · 4 min read · Updated 24 April 2026
Translated from French — AI-assisted and reviewed by the editorial team. The French version is authoritative. Read the original · About our translation policy
In an information document dated August 2024, titled "Exchange Rate and the Foreign Exchange Market," the BRH highlighted certain concepts of the foreign exchange market within the framework of International Finance. Let's provide some clarifications.
Dr. Eddy N. Labossière
05/14/2025.
With a view to informing and educating, we will focus on concepts of International Finance, in particular, we will first discuss the exchange rate, then exchange rate regimes, and the foreign exchange market (Forex)*
The exchange rate indicates the price ratio between two (2) currencies (a currency is any foreign currency). It represents the rate at which currencies are exchanged. By definition, this value expresses the number of units of foreign currency that can be purchased with one unit of national currency and vice versa. The exchange rate is fundamental for determining the cost of goods and services and is characterized by daily variations based on market quotations. These fluctuations can lead to an "appreciation or depreciation of the exchange rate." Among the elements that influence the value of a currency are "interest rates" applied by Central Banks and the dynamics of imports and exports. Financial investments and speculative operations on the exchange rate also affect the mechanisms of supply and demand and,
consequently, the value of the currency. What exactly is the exchange rate, how is it calculated, and what is "the impact of rate variations on international markets?" Definition: "Nominal Effective Exchange Rate"
The definition of the exchange rate can follow two (2) different methods. It can be the "nominal effective exchange rate" or the real rate, which is defined as the price of one currency relative to another and can be quoted "at certainty" (direct quote) or "at uncertainty" (indirect quote). In the first case, it indicates the amount of foreign currency that can be purchased with a single unit of national currency. The "at uncertainty" quote, on the other hand, expresses the amount of national currency needed to buy one unit of foreign currency. The exchange ratio between two currencies can also be calculated indirectly. To do this, it is necessary to take a third currency as a reference and compare the respective exchange rates. The calculation of what is called the cross rate is obtained by measuring the exchange ratio that links the two currencies to the reference currency: "The exchange rates thus obtained must be compared to obtain the cross rate." "Real Exchange Rate (RER)". With the (RER), the definition is based on comparing the prices of goods and services sold on the domestic market with the cost of the same goods and services on the foreign market.
The "prices in question must be re-evaluated at their nominal value" between the respective currencies, according to the following formula:
Cn × Pi /Pe.
Where Cn is the nominal value between the two currencies, Pi is the price of the good on the domestic market, and Pe is the price of the good or service on the foreign market.
The "exchange rate can also be described as effective or bilateral." This expression indicates price competitiveness within a given economic zone. The measurement of the effective exchange rate takes into account price changes by comparing different competitive zones. Factors evaluated include the consumer price index and the volumes of trade flows. "Calculation of the exchange rate"
The exchange rate is calculated using a multiplier coefficient. Thus, to find the exchange rate between the Euro and the Dollar, one must have the coefficient to apply. Let's take the example of a multiplier coefficient of 1.10. If you wish to sell 100 Euros, by applying the coefficient, you can then buy 110 Dollars. The formula is:
Amount of currency to sell × multiplier coefficient = Amount of currency to buy. Conclusion. In International Finance on the foreign exchange market (Forex), a perfect mastery of the following concepts, among others, is essential for optimal decision-making in currency management by market participants: The exchange rate, the appreciation or depreciation of a currency, the nominal effective exchange rate, the cross exchange rate, the real exchange rate (RER), direct or indirect quotation, the effective or bilateral exchange rate, the multiplier coefficient between two (2) currencies, the calculation of the exchange rate.
(TO BE CONTINUED)
- Foreign Exchange.
The exchange rate indicates the price ratio between two (2) currencies (a currency is any foreign currency). It represents the rate at which currencies are exchanged. By definition, this value expresses the number of units of foreign currency that can be purchased with one unit of national currency and vice versa. The exchange rate is fundamental for determining the cost of goods and services and is characterized by daily variations based on market quotations. These fluctuations can lead to an "appreciation or depreciation of the exchange rate." Among the elements that influence the value of a currency are "interest rates" applied by Central Banks and the dynamics of imports and exports. Financial investments and speculative operations on the exchange rate also affect the mechanisms of supply and demand and,
consequently, the value of the currency. What exactly is the exchange rate, how is it calculated, and what is "the impact of rate variations on international markets?" Definition: "Nominal Effective Exchange Rate"
The definition of the exchange rate can follow two (2) different methods. It can be the "nominal effective exchange rate" or the real rate, which is defined as the price of one currency relative to another and can be quoted "at certainty" (direct quote) or "at uncertainty" (indirect quote). In the first case, it indicates the amount of foreign currency that can be purchased with a single unit of national currency. The "at uncertainty" quote, on the other hand, expresses the amount of national currency needed to buy one unit of foreign currency. The exchange ratio between two currencies can also be calculated indirectly. To do this, it is necessary to take a third currency as a reference and compare the respective exchange rates. The calculation of what is called the cross rate is obtained by measuring the exchange ratio that links the two currencies to the reference currency: "The exchange rates thus obtained must be compared to obtain the cross rate." "Real Exchange Rate (RER)". With the (RER), the definition is based on comparing the prices of goods and services sold on the domestic market with the cost of the same goods and services on the foreign market.
The "prices in question must be re-evaluated at their nominal value" between the respective currencies, according to the following formula:
Cn × Pi /Pe.
Where Cn is the nominal value between the two currencies, Pi is the price of the good on the domestic market, and Pe is the price of the good or service on the foreign market.
The "exchange rate can also be described as effective or bilateral." This expression indicates price competitiveness within a given economic zone. The measurement of the effective exchange rate takes into account price changes by comparing different competitive zones. Factors evaluated include the consumer price index and the volumes of trade flows. "Calculation of the exchange rate"
The exchange rate is calculated using a multiplier coefficient. Thus, to find the exchange rate between the Euro and the Dollar, one must have the coefficient to apply. Let's take the example of a multiplier coefficient of 1.10. If you wish to sell 100 Euros, by applying the coefficient, you can then buy 110 Dollars. The formula is:
Amount of currency to sell × multiplier coefficient = Amount of currency to buy. Conclusion. In International Finance on the foreign exchange market (Forex), a perfect mastery of the following concepts, among others, is essential for optimal decision-making in currency management by market participants: The exchange rate, the appreciation or depreciation of a currency, the nominal effective exchange rate, the cross exchange rate, the real exchange rate (RER), direct or indirect quotation, the effective or bilateral exchange rate, the multiplier coefficient between two (2) currencies, the calculation of the exchange rate.
(TO BE CONTINUED)
