Currency 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 1.2, it means that 1 US Dollar can be exchanged for 1.2 Euros. These rates fluctuate based on various factors, including economic conditions, interest rates, and market demand. Exchange rates can be categorized as fixed or floating. A fixed exchange rate is set by a government and does not change frequently, while a floating exchange rate is determined by the market and can vary throughout the day. Understanding these rates is essential for international trade and travel.