What is the main purpose of foreign exchange (FX) rates?

Foreign exchange (FX) rates serve the primary purpose of measuring the value of different currencies against each other. This measurement allows individuals, businesses, and governments to understand how much one currency is worth in terms of another. For instance, if the exchange rate between the US dollar and the euro is 1.10, it indicates that one dollar can be exchanged for 1.10 euros.

This information is crucial for international trade, investment decisions, and travel, as it helps determine how much one would pay in local currency when trading goods or investing abroad. The fluctuations in FX rates can significantly impact economic conditions, trade balances, and even inflation rates in various countries.

In contrast, other options do not capture the essential function of FX rates. Stock market values pertain to equities rather than currencies, interest rates are influenced by monetary policy rather than directly determined through currency exchange, and commodity prices—while they can be affected by currency value—do not reflect the role of FX rates directly.