Money Exchange rate or currency exchange rate is a financial term; it refers to a rate at which one currency is exchanged for another. If, for example, you have traveled to Great Britain from United States, you had exchanged your dollars from U.S currency to British Pounds. One nation’s currency isn’t accepted into another nation, you must exchange your currency in the respective currency of the nation where you are thinking of spending it or using it. You can’t buy bread with U.S dollars in UK, because you need to have pounds for buying stuff from the country. And this is very logical for a currency to be in action when you travel out of country.
Who Determine Exchange Rates?
The exchange rates are determined by the foreign exchange market, which operate 24 hours a day on business days. The market also has sellers and buyers engaged in the trading of foreign currency (Forex) around business days, and the rate may have slight fluctuation according to the trading trends besides change in economy, inflation, economical uncertainty and recession. There are several factors involved in the change of currency level and the major factor is a change in the worth of gold or silver globally. In 1930, a fixed dollar exchange rate was decided at an unchanging level when one ounce of gold was worth around 35 dollars. Today, the worth of one ounce gold has reached to 70 dollars because of inflation, instability, and bad economics around the world.
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To exchange your currency from one form to another, you have to visit local retail exchange market of the particular country. For instance, you have traveled to Japan from Bahrain, now you need to meet a money dealer who will have his own quotations with respect to exchange of the currency you are holding. The dealer also has his margin (profit) from the currency trades so you should have to agree with the rate at which he is selling or buying the currency. Money dealers either include their profit in the quotes or recover it as a commission directly from the customer. So you need to check it before you pay commission to your money changer.
Most of the people interested in traveling need to pass through the process of currency exchange where they have to check the exchange rate for specific currency they are going to buy in exchange of currency they are having at that moment. Business needs also make us exchange currencies and almost 5% of forex trading is done in this connection where people buy another currency in exchange of their local currency to allocate it for some business need. Rest of 95% business in forex is done on the basis of speculations and in an expectation to earn profit due to the fluctuating exchange rates which creates room for investments for small traders and also for mega investing companies. If you are also intending to exchange currency either for traveling or for business needs you must have an understanding of exchange rates first.