Exchange Rate Determination and Foreign Market in Bangladesh

Internship Report

On

Exchange Rate Determination and

Foreign Market in Bangladesh

Introduction: Amongst the early communities and primitive tribes, the only way in which a man could satisfy a want which he could not himself supply was by exchanging the products of his own personal effects for those of his neighbors. This exchange of personal output is known as 'Barter'. For centuries, the exchange of products and services has been conducted by an indirect method of barter involving some media in terms of which the values of all commodities can be expressed. Even when in recent times, transactions between governments or between residents of different countries have been described as "Barter Trade". The limitations and disadvantages faced in such barter trade has emerged the invention of currency based transaction. This transaction has developed in such a stage that it is now a common practice to transact with two or more currencies which have been named as "Foreign Exchange". Foreign Exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Such conversion of one currency into another currency is done at some predetermined rates. The rate by which a currency is converted in to another currency is generally known as 'Rate of Exchange'.

RATE OF EXCHANGE:

The rate of exchange is the price at which a currency can be exchanged for money in terms of another currency. The term 'money' to a country represents its legal tender which is the local currency lawfully recognized as a medium of exchange. Thus, an important aspect of a foreign exchange transaction is the rate at which the conversion of one currency into another takes place. For doing such a conversion between any two currencies, one must know the value of one currency in terms of other and this is what is meant by a Rate of Exchange. In other words, the rate at which the conversion of one currency into another is effected or the...