Foreign exchange rates refer to the value of one currency in relation to another. For example, if the exchange rate between the US Dollar and the Euro is 1.20, it means that 1 US Dollar can be exchanged for 1.20 Euros. These rates fluctuate based on various factors, including economic conditions, interest rates, and market demand. Countries use foreign exchange rates to facilitate international trade and investment. When businesses or individuals travel abroad or purchase goods from other countries, they need to convert their currency into the local currency, which is influenced by the current exchange rate.