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The real exchange rate (RER) is the purchasing power of a currency relative to another at current exchange rates and prices.It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country.This reduces rounding issues and the need to use excessive numbers of decimal places.
XE Currency Converter - Live Rates com/currencyconverter Calculate live currency and foreign exchange rates with this free currency converter.The home country is where a company is headquartered.The firm is likely to be paid or have profits in a different currency and will want to exchange it for its home currency.Any company operating globally must deal in foreign currencies.It has to pay suppliers in other countries with a currency different from its home country’s currency.
There are various ways to measure RER. Thus the real exchange rate is the exchange rate times the relative prices of a market basket of goods in the two countries.