Understanding Exchange Rates

Exchange rates tell you how much of one currency you need to buy another. Here's what you need to know.

What is an Exchange Rate?

An exchange rate is the price of one currency expressed in terms of another. For example, if USD/EUR = 0.85, it means 1 US dollar equals 0.85 euros. Rates change constantly based on supply, demand, and market conditions.

Base vs Quote Currency

In a currency pair like USD/EUR, the first currency (USD) is the base and the second (EUR) is the quote. The rate shows how many units of the quote currency you get for one unit of the base.

💡 Quick tip: Use our Currency Converter to see live rates in action. For percent gains or losses between rates, try our Percentage Change Calculator.

What Affects Exchange Rates?

Interest rates — Higher rates often attract foreign investment
Economic data — GDP, employment, inflation reports
Political stability — Events can cause volatility
Trade balances — Surpluses and deficits influence demand

How to Use Exchange Rates

When traveling or sending money abroad, always compare the rate you're offered with the mid-market rate. Banks and exchange services add a spread (their profit margin). A smaller spread means you get closer to the "true" rate. Our Exchange Rate Spreads guide explains this in more detail.

Currency Pair Notation

Pairs are written as BASE/QUOTE (e.g. USD/EUR). The rate tells you how many units of the quote currency you get for one unit of the base. See our Currency Pairs Explained guide for majors, minors, and more.

For informational purposes only. Not financial advice.