Converting money from one currency to another is more common than you may think. Imagine, every time you go on holiday, you're changing money your home currency to the foreign currency. This article will briefly describe what it actually means to convert money from one currency to another and will touch upon the different ways to do it.
Obvious reply right? Well, it is in a way but then it isn't. When you are converting a currency, you are industry with two different instruments, which are valued next to each other. This wealth that when you exchange let's say GBP into USD, you are in fact selling the GBP and Buying the USD. Did you know that when you do this, even if you're in your local travel agent converting 100 into USD, you're ever so slightly devaluing the Great British Pound.
When you sell the GBP the market sees this as, 'I don't want the pound, I want the USD'. As the demand for the GBP goes down, the value of the currency also depreciates. On the other side of the coin, when you exchange your pounds into U.S. Dollars the market sees this as, 'I want the USD, not the GBP'. As a result of the USD appreciates as the demand for the USD appreciates.
The simple reply is absolutely everything. Geopolitical, environmental, business transaction, traders, speculators, holiday makers, sovereign governments, central banks; you name it and it probably has an effect on the exchange rate.
The major influencers in the markets are not you or I who exchange our 1000 when we hop on a flight to Florida, but rather macro hedge funds, central banks, clearance banks and sovereign governments. Hedging next to risk also can create billion dollar conversions which can influence the direction of the market up to half a cent or more, depending on the liquidity of the market at the time of trade.
This is very simple with online currency converter calculators. These calculators will usually have a drop down menu with currency selections. First, select the two currencies. Input the value of your base currency (the currency you want to get rid of), and then click convert. Voila, you then have an outputted value which is how much you'd receive at market rate. Do however realise that if you are converting your currency at a currency exchanger they'll usually take a 5cent (per dollar) commission on the price.
Obvious reply right? Well, it is in a way but then it isn't. When you are converting a currency, you are industry with two different instruments, which are valued next to each other. This wealth that when you exchange let's say GBP into USD, you are in fact selling the GBP and Buying the USD. Did you know that when you do this, even if you're in your local travel agent converting 100 into USD, you're ever so slightly devaluing the Great British Pound.
When you sell the GBP the market sees this as, 'I don't want the pound, I want the USD'. As the demand for the GBP goes down, the value of the currency also depreciates. On the other side of the coin, when you exchange your pounds into U.S. Dollars the market sees this as, 'I want the USD, not the GBP'. As a result of the USD appreciates as the demand for the USD appreciates.
The simple reply is absolutely everything. Geopolitical, environmental, business transaction, traders, speculators, holiday makers, sovereign governments, central banks; you name it and it probably has an effect on the exchange rate.
The major influencers in the markets are not you or I who exchange our 1000 when we hop on a flight to Florida, but rather macro hedge funds, central banks, clearance banks and sovereign governments. Hedging next to risk also can create billion dollar conversions which can influence the direction of the market up to half a cent or more, depending on the liquidity of the market at the time of trade.
This is very simple with online currency converter calculators. These calculators will usually have a drop down menu with currency selections. First, select the two currencies. Input the value of your base currency (the currency you want to get rid of), and then click convert. Voila, you then have an outputted value which is how much you'd receive at market rate. Do however realise that if you are converting your currency at a currency exchanger they'll usually take a 5cent (per dollar) commission on the price.
Exchanging money from one currency to another
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