Exchange rate denomination

The IMF's databank exchange rates are often denominated in dollars,

either
Local currency per US dollar (for the local currency this is the direct rate)

or
US dollars per unit of local currency (for the local currency this is the indirect rate) e.g. £0.60 per US dollar or $1.666 per £ sterling

Calculating bilateral exchange rates

Often an exchange rate between two non US dollar currencies will be required. This can be calculated from the pair of dollar exchange rates. For example to find the exchange rate between the UK pound and the Thai baht we multiply direct pound-dollar rate by indirect baht-dollar rate to get direct pound-baht rate

At 1991 exchange rates
direct pound-dollar rate		indirect baht-dollar rate		direct pound-baht rate
£/$	x	$/B	=	£/B
0.5	x	0.0395	=	0.01975

That is to say
it would cost £0.01975 (1.975 pence) to buy 1 baht

or
£1 would buy 50.63 baht

Interpreting bilateral exchange rates

Authorities managing currencies will do so in many ways (see previous sections). The comparative information contained in a bilateral exchange rate needs to be interpreted with care as it may reflect factors not required in a comparison.

For example, it is not uncommon for a currency exchange rate to be pegged to the dollar. As the dollar exchange rates rises or falls in relation to other currencies, the pegged currency will similarly rise or fall in relation to those currencies. Changes in the pegged currency value will reflect changes in the dollar market, not changes in its own country's economy.

Some countries peg their rate to the Euro and others to mixtures of rates weighted by trade value. The same point as above applies.