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What I am NOT asking about is how one currency appreciates/depreciates against another. I'm struggling to understand how the "official" rate of exchange of two currencies, say the US Dollar and Chinese Yuan, is advertised online.

What does the advertised rate even stand for and how is it computed? The price of a stock listed on the NYSE, for example, is the cost of the last transaction. Can the exchange rate be similarly defined?

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Can the exchange rate be similarly defined?

Yes - it could be defined as the rate of the last transaction on that market, or it could be the bid, ask, or midpoint between the two. FX markets have bid/ask books just like stock markets.

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  • "It could be defined" Is it actually defined like that?
    – ToniAz
    Commented Oct 2, 2019 at 17:00
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    It depends on who is publishing the rate and what they are trying to convey. Just like stock, you can't necessarily trade at the "last" price - you buy at the ask price or sell at the bid price. In retail conversions (e.g. a bank), there is usually a different rate depending on which way you're converting. So there's not one "official" rate.
    – D Stanley
    Commented Oct 2, 2019 at 18:46

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