How Exchange Rates Work

Exchange rates determine the value of one currency in terms of another. They are vital for international trade, tourism, and investment. Rates fluctuate based on economic factors like interest rates, inflation, and political stability.

When you exchange money at a bank or airport, you often pay a "spread" – the difference between the market rate and the rate they offer you. Our tool provides live mid-market rates to help you understand the true value of your money.

Factors influencing rates include:

• Inflation: Generally, a country with consistently lower inflation displays a rising currency value.
• Interest Rates: Higher interest rates offer lenders in an economy a higher return relative to other countries.
• Current Account Deficits: A deficit means the country is spending more on foreign trade than it is earning, borrowing capital from foreign sources to make up the deficit.