Exchange Rate Calculation
Calculate exchange rate by dividing amount received by amount given. If 100 USD converts to 85 EUR, exchange rate is 0.85 EUR/USD. Inverse rate is 1.176 USD/EUR (100/85). Understanding both directions helps compare quotes and verify you're getting fair rate from currency providers.
Exchange rates are quoted as currency pairs - EUR/USD 0.85 means 1 USD equals 0.85 EUR. Inverse USD/EUR 1.176 means 1 EUR equals 1.176 USD. Both represent same exchange relationship from different perspectives. Check which direction rate is quoted to avoid confusion when comparing providers.
Professional forex markets quote bid/ask spreads - price to buy vs sell. Wider spreads mean higher costs for conversion. Retail currency services mark up interbank rates 2-15% depending on provider and amount. Large transactions get better rates. Compare multiple providers for best rates on significant exchanges.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Continuously in forex markets - rates update second by second during trading hours. For retail exchanges, providers update rates hourly or daily. Major economic events can cause dramatic rate movements within minutes.
Interest rate differences, inflation rates, economic growth, political stability, trade balances, market sentiment, and speculation. Central bank policies strongly influence rates. Stronger economy typically means stronger currency.
Yes for large future transactions using forward contracts or currency options. Individuals can exchange currency when rates are favorable and hold in foreign account. Banks offer foreign currency CDs locking rates for deposits.