So, when a nation experiences inflation, its currency value decreases.ĭifferences in interest rates – when lenders in an economy secure higher interest rates, they have a higher return relative to other countries. This is because purchasing power increases relative to other currencies. Strong economic performance – foreign investors prefer to invest their capital in countries with positive economic performance over those showing signs of economic or political turmoil.ĭifferences in inflation – when a nation has consistently low inflation, it can exhibit rising currency value. Several factors influence how exchange rates are calculated: As currency values are always relative to one another, you’ll always receive them as a pair from your bank or money transfer service provider. Financial institutions like commercial banks, central banks, money managers and hedge funds use forex trading to trade global money around the clock.Įarlier on, we mentioned that EUR/USD is a popular currency pair. How are exchange rates calculated?įorex refers to foreign exchange and the forex market determines the exchange rate for every currency. So, you’d need to have $3,804.35 to exchange for €3,500.Īlternatively, if you'd prefer to do your calculations in a spreadsheet, you can use Excel’s VLOOKUP function which has rows, columns and tables to convert from one given currency to another. To work out how many US dollars you will need to convert to euros, you need to divide 3500 (C) by 0.92 (B), which equals 3804.35 (A). At the time of writing this, $1 is worth €0.92 (B). You know you need to have €3,500 (C) for your upcoming trip. Therefore, she will need $3,804.35 to receive the €3,500 to pay for her trip. When the time comes to pay for the trip, the dollar to euro exchange rate is €0.92. This is the amount of money you’d have in dollars after the exchange - $1,090.ġ000 * 1.09 = 1090 Scenario 2: Reversing the formula to calculate USD into EURĮlsie, who lives in the United States, has a skiing trip planned in the French Alps which will cost €3,500. To calculate your currency, you would multiply 1000 by 1.09, which equals 1090 (C). At the time of writing this, the exchange rate is $1.09 (B), so every €1 you have is worth $1.09. You have €1,000 EUR (A) that needs to be converted to USD. When they exchange their funds the euro to dollar exchange rate is €1.09, meaning their son will receive $1,090. Susan and David live in Spain and want to send €1,000 as a gift to their son who lives in the United States. Here is the key for our simple currency conversion formula:Ī = money you have in the currency you wish to convert B = exchange rate C = money you have after applying the exchange rate Scenario 1: EUR as a base currency to be converted into USD Since EUR/USD is one of the most popular currency pairings, we’ll use it to explain how to work out currency conversion. How to work out currency conversion yourselfįinding foreign exchange rate quotes online or through your local bank is very different to being able to understand how to read them. We’ll cover the formulas to convert currency and explain how to compare the market exchange rate with what you’ll receive from your bank or money service transfer provider. In this blog, we’ll show you how to get the best value for money from your international transactions. As they fluctuate on a daily basis, how much your currency is worth can vary at any given time. Their ATMs are placed at several locations in public places.Ĭredit cards, currency cards and traveller's cheques are widely accepted in the UAE.ĪTMs typically provide the best exchange rates (even when factoring in possible currency exchange fees from your home bank), but traveller's cheques in either US Dollar or UK Pounds Sterling are recommended to avoid additional exchange rate charges.Exchange rates refer to how much it costs to exchange one currency into another. You can exchange money in hotels and at any of the licensed money exchange centres in the UAE, which are located at airports, in malls and in public markets.įoreign banks have branches in the UAE. Foreign currency of almost any denomination can be exchanged in the UAE.
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