The exchange rate is the relative value of one currency against another. For example, Eur/Usd is the value of one Euro against One US Dollar. Likewise, the Usd/Jpy pair is the relative value of one US dollar against 100 Japanese Yen.
The rate given is the amount that is needed to purchase or sell a unit of another currency. For example, assume the Eur/Usd pair is currently priced at 1.200. This means that one Euro is equivalent to $1.20 US dollar.
Likewise, a Usd/Jpy rate of 90.00 means that one US dollar is equivalent to 90 Japanese Yen. The currency exchange rate is always in a constant state of fluctuation due to supply and demand of one currency against another. Those into forex trading know this well.
The fluctuation is key to how money is made in forex trading. Some countries peg their currencies against a basket of currencies (normally the Usd along with others) in order to improve stability. Malaysia is a country that pegs the ringgit. It also makes currency predictions easier with regards to international business.
The exchange rate is highly influenced by business activities of the currencies issuing country. Large amounts of international trade creates demand for the currency and generally improves value of the currency.
This however, does not seem to be the case for some countries. Namely, Japan. It would seem that a country like Japan that has a thriving export market (Cars, electronics) would have a pretty stout currency.
And they do, its just that there is a case that can be made against Japans Central Bank on them keeping the value of the yen weak. Which makes sense since a stronger yen means mroe expensive cars and electronics.
As such, it is imperative that the Yen remain fairly weak against major currencies such as the dollar, euro and the pound as these three currencies represent the the three regions that buy the most Japanese imports.
