Foreign Exchange Calculator
Undoubtedly, Foreign Exchange Calculator is very crucial and yet complex to understand. Especially those technical terms make it all the more confusing. We will give you all the very basic terms related to forex for you to understand it.
- Market rate/spot rate: this is the rate in which banks and other big financial groups charge each other when they deal with a large amount of foreign currency. The formal term that denotes it is ‘interbank’ rate. But that is perhaps all the more difficult to remember.
- Spread: the difference between the buy and sell rates offered is called the ‘spread.’ A Currency exchange company or provider generally provides it.
- Sell Rate: in this sell rate, we exchange foreign currency for local currency. To make it simpler, let us take an example, suppose you are going to England, there you have to exchange your US dollars with the pound in sell rate.
- Buy rate: it is the rate in which the exchanger will buy currency from you. And in exchange, you will get local currency. Again we can take a similar example, you have finished your travel in England, and you are coming back to the US. You will return all the pound to the exchanger. He will buy the currency at the buy rate of the day and give you back all remaining balance in the US dollar.
Vacation Money Rate or Tourist Rate: this is only another term we know the sell rate as. You have just learned the fundamental words related to the exchange rate, and now we will go deeper inside into the matter of the Exchange market.
Q: Why does the Foreign exchange rate fluctuate?
As the financial market change with a very rapid course of time, the currency exchange rates also fluctuate with that. It continually moves up and down to match the changed value for money. Some reasons determine the ups and downs of the price, such as:
- Gaps in demand and supply
- Any major political issue
- Any major economic changes
Q: Why the market rate and tourist Foreign exchange rate are not the same?
The market of the Foreign exchange rate is applicable only for the banks and the big companies. The currency a tourist get in a sell rate must differ from the basic spot rate as it takes a lot of people and effort as well as it passes through a different process to reach your hand.
Foreign Exchange market
The foreign exchange market is the most liquid financial market in this whole world. All the govt. Banks, commercial banks, other profitable corporations, and institutes include in this system. The average turnover of this global exchange market is rising with leaps and bounds. According to the survey performed in the year 2010, the average daily turnover of it is $3.98 billion.
In April 2010, trading in the United Kingdom was 36.7 % of all the businesses and thus making it the most crucial sector for foreign exchange trading in the world. The biggest geographic trading center is the United Kingdom and primarily London. As the London market dominates the trade, a particular currency’s quoted price is the London market price.
Foreign Exchange rate flexibility
It is a monetary system that allows the currency exchange rate change according to the demand and supply rate in the market. Another term for Fluctuating Foreign exchange rate. In this exchange regime, the currency’s value fluctuates as per the foreign exchange market mechanism. The currency which uses a floating exchange rate is also known as a floating currency. A floating currency contrast with fixed money. In the modern world, all the currencies of the different places are floating the currency. The term fixed currency does not exist in the real world market.
The most widely traded currencies are:
The most-traded currencies are the United States Dollar, the Indian rupee, The Euro, The Norwegian krone, the Japanese Yen, the British Pound, and finally, the Australian Dollar. A currency future, also called FX Future or Foreign Currency Exchange Future, is a contract for the future to exchange one currency for another at a predefined date in the future at a rate that has defined on the purchase date. These currency futures introduced in the year 1970 in New York. It created by the International Commercial Exchange (New York).