If $1 = 0.5 pound sterling and 1 pound sterling = 40 Swiss francs, the equilibrium exchange rate between dollars and francs is $1 = 20 francs.
When economists talk about equilibrium, they simply mean that the forces of demand and supply have met at the same point. Something with the same price and quantity. As a result, it should come as no surprise that economists see the "price" of another country's currency as merely another factor that can attain equilibrium. When seen in this light, the equilibrium for the price of another country's money, or the exchange rate for that currency, is also the meeting point between demand and supply for that country's money, relative to your country's money, of course.
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