5 Things to Know About Currency Exchange Rates

Currency exchange rates show how much it costs to buy different forms of money. Travelers and traders alike should know how these rates work and affect global finance. Whether you are interested in international investments or are simply planning a trip abroad, it pays to know the basics.

Rates are crucial to the world economy.

The average citizen probably thinks about exchange rates only when going overseas. But they have perpetual, widespread influence. They indicate a country’s economic standing. Rates are set in the foreign exchange market, which is active 24/7. They are largely shaped by national interest rates, inflation and growth. Values are determined in relation to one another, so they are listed in pairs, such as USD/EUR.

Rates change all the time.

Many countries (including the U.S.) have flexible exchange rates. Their government’s don’t fix rates, hence the fluctuation. When a nation’s currency is strong, travel is more affordable for its citizens and it is an attractive place to trade – vice versa when it is weak. You can track a currency’s rise or fall online. If you are traveling soon, use such resources to determine when to buy currency (sooner for a weak dollar and later for a strong dollar).

You can exchange money before leaving the country.

Travelers need to know how to obtain currencies easily and affordably. It may be expedient to exchange at the airport, but you do not have to wait until you leave. Exchanging in advance may be cheaper. Check if you can pick up currency at your bank. Travel agencies and currency converters may also help. Contact you credit card company, too, to know their terms and services abroad.

Payment methods vary.

Airport exchangers can be both convenient and costly. There are lots of options but high fees. Explore what’s beyond the airport. Many suggest travelers primarily use credit cards. Check the fees your company charges, if any. Keep in mind sometimes merchandisers charge fees for cards or outright reject them. Still, it should work most of the time and be more secure than carrying cash. You should also see if your bank has foreign branches or partners. Fees may be low or waived, even at ATMs. For out-of-network banks, research their fees.

Calculating exchange estimates is easy.

Knowing how to calculate exchanged currency amounts is a useful skill for anyone. The math may seem tricky at first, but it is nothing to be afraid of. Simply look up the current exchange rates and multiply them by the amount you want to trade. You can Google current rates or find them at the airport. Keep in mind some exchangers round the numbers up or down.