The Effect of Foreign Exchange (Exchange Rate: Selling and Buying Rates)

Abstract

This study discusses the foreign exchange market from a literature perspective, focusing on the working mechanism of the foreign exchange market, exchange rate systems, and the determinants of exchange rates during the 2020–2025 period. The background of this research is based on the increasing exchange rate volatility caused by global economic uncertainty and the dynamics of international financial markets.

The purpose of this study is to understand how the foreign exchange market mechanism shapes prices and volatility, to analyze the characteristics of fixed, floating, and managed float exchange rate systems, and to identify the main determinants of exchange rates and their implications for stabilization policies.

The research method used is a literature study with a qualitative-descriptive approach through the review of scientific journals, academic books, and official institutional reports accessible in PDF form within the 2020–2025 period.

The results show that exchange rate movements are influenced by a combination of macroeconomic fundamental factors, capital flows, market sentiment, as well as monetary policy intervention and credibility. The managed float exchange rate system is widely applied because it provides flexibility while allowing room for stabilization.

The conclusion of this study emphasizes the importance of a comprehensive and adaptive policy approach. It is recommended that future research use empirical data to further analyze the effectiveness of exchange rate policies.