Facts You Need to Know about Currency Exchange Rates

 

The currency rates of a currency are the rates can help in determining the cost of exchanging it with the other currency/currencies.

In currency market the rates of exchanging currencies fluctuate constantly when they are traded actively.

The prices of currencies fluctuate up and down depending upon currency trading strategies just like

the prices of other assets like stocks and gold etc fluctuate.

For instance, the market price of Canadian dollar for day trading can be the number of US dollars

required to buy one Canadian dollar.

However the market exchange rate of a currency can be different from what a bank can give you while exchanging that currency.

Forex traders usually use currency calculator to calculate the price of one currency against the other.

The information provided in this write-up will allow you to know about the working of currency exchange rates and

how you can calculate it.

 

How to find exchange rates in the market?

 

Currencies are bought and sold 24×7 by the institutions and traders throughout the world.

When a currency is exchanged with the other then it is called trading in currency as a currency will be used to buy the other.

The currencies used in a trade become a pair of currencies and the rate on which they will be exchanged will be their exchange rate.

You can know the exchange rate of any currency pair from any forex broker or the forex markets.

 

Calculating the Exchange Rate

 

The exchange rate of USD /CAD is 1.0950 which means that to get one US dollar you will have to spend 1.0950 Canadian dollars.

The currency that is listed first is considered as one unit while calculating the exchange rate of the other currency.

In this example, the USD is the first currency and CAD is the second.

However if you want to find the cost of one Canadian dollar in terms of USD then you will have to

use formula: 1/exchange rate of CAD i.e. 1/1.0950 = 0.9132 USD.

It will be the exchange rate for the pair of CAD/USD.

 

Spreads of conversion rates

 

You may not get the price of your currency provided by a currency trader when you exchange it from a bank or a currency exchange house.

In fact, like payment service providers as well as credit card services,

banks and currency exchange houses will make a profit by marking up the price of your currency.

For instance, if the market rate of exchange of USD/CAD is 1.0950 CAD then the exchange rate

of the banks can be 1.12 CAD.

The difference between these rates will be their profit.

This profit is considered by them as their service charges to provide you cash money whereas market traders may not give you cash. In this way,

banks and conversion house convert your currency in cash without any processing fee, withdrawal fee or wire fee.

 

So, if you want to exchange a currency with other then you must know the exchange rate of that pair of currencies.

You can shop around to find the better exchange rate for your currency pair.

 

Written By : YOUSSEF J A ALMEER

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