The amount of one currency that may be purchased for each unit of another currency is known as the exchange rate.
A currency increases in value if it costs more in another currency to purchase it and decreases in value if it costs less.
The foreign exchange market is where currencies are traded. When something is exchanged, there is a price, just like in any other market. A currency is purchased and sold on the foreign exchange market, and the price is stated in another currency.
An exchange rate is used to represent that price.
For instance, in the Hamsterville snark market, the snark's exchange rate to the U.S. dollar.
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