Passing by a commercial bank or foreign exchange dealer, you would have noticed exchange rates posted on their windows. Have you ever wondered how these numbers are obtained, why they change from day to day and how these movements impact Fiji’s trade? We will attempt to answer these questions in this article.
Firstly, let us go over the basics – what is an exchange rate? Well, an exchange rate is simply the value or price of one currency in terms of some other currency.
The Fiji dollar is pegged to a weighted basket of currencies of Fiji’s main trading partners – Australia, New Zealand, the United States,
Japan and the Euro- zone. What this basically means is that, using a special formula, the Reserve Bank of Fiji (RBF) calculates the official exchange rate for the Fiji dollar, taking into account exchange rates for the currencies of our major trading partners.
This is often referred to as a “trade weighted basket of currencies”. The weights of each currency in the basket are determined by our
trade with these countries.