How to Read and Calculate Exchange Rates

Exchange rates are quite common for both international investors and travelers. Although exchange rates quotes are easy to get these days, reading and doing calculations can be a bit challenging to those who are not familiar with them. Currency converter tools can help you eliminate guesswork from exchanging foreign currencies. In this post, you learn how to find and read currency exchange rates and tips to take it into account when using them.

Finding and Reading Exchange Rates

You can easily find exchange rates in a wide range of places, starting from commercial banks to the specialty websites. For travelers looking for currency conversions, they can find rates posted at the local banks and airports. International investors trading the foreign exchange market can look at their trading platform to get real-time information.

Usually, quotes are provided in pairs since the currency values are relative to each other. The most commonly quoted currencies are the dollar and the euro. That is because they are regarded as reserve currencies. Currency pairs keep fluctuating all the time because of various economic factors that include demand and supply, economic indicators, hedging and commercial activity. Although these fluctuations happen at all times, the changes only amount to fractions of the currency’s known value.

You should note that most airport currency exchangers are known to generate revenue by charging a wide spread between the different currencies. That means, they do not charge a commission or fee, but make a lot of money by exaggerating exchange rate differences. A lot of consumers can find the best deals when they exchange the currencies through foreign or local banks that provide the most fair and attractive exchange rates.

Calculating Exchange Rates

currency conversionAlthough calculating exchange rates seems to be easy on the surface, the truth is that it is quite confusing if you do not recall your high school mathematics. For instance, converting foreign exchange for a traveler is not a big deal. However, converting currencies when analyzing foreign stocks financial statements mean a huge difference for investors who want to make investment decisions.

Useful Tools

The truth is that calculating and reading exchange rates are not that difficult, but if you make small errors they can result in big mistakes. Fortunately, there are free tools you can use to reduce your chance of making errors. Always double check your own work before you make a potentially costly mistake that may be difficult to reverse.

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