Many individuals and businesses receive foreign currency from friends and family members or business associates who are living abroad. This foreign currency has to be taken to a commercial bank or a foreign exchange dealer to be converted into Fiji dollars. This conversion is done using an “exchange rate – in this case, defined as the amount of Fiji dollars per unit of foreign currency.” As one would discover the next time they would like to convert foreign currency into Fiji dollars, the exchange rate changes. How is the Fiji dollar exchange rate determined and what impact does its changes have on Fiji’s trade with the rest of the world? This article attempts to answer these questions.
The exchange rate of the Fiji dollar is determined via a fixed exchange rate system whereby the Fiji dollar is pegged to a trade weighted basket of currencies of Fiji’s main trading partners – Australia, New Zealand, the United States, Japan and the Euro zone. The weight of each currency in the basket is determined by its importance to Fiji’s trade in goods and services
So what is a Fiji dollar actually worth in comparison to other currencies? How is its value derived? Each day, the RBF calculates the official exchange rate for the Fiji dollar against the major trading partner currencies and releases these rates to commercial banks and foreign exchange dealers. This is the price at which the commercial banks can buy and sell US dollars with the RBF.