Currency Converting Options

If your are going to be converting money from one type of currency to another, it will be helpful to know something about the current exchange rates and even a bit about other related terms and even how these things are decided upon.

In finance, an exchange rate is a ratio between two currencies and specifies how much one currency is worth in terms of the other. For example, and exchange rate of 60 Japanese yen to the United States dollar means that 60 Japanese yen is worth only one United States dollar. This type of exchange rate is what’s known as a foreign exchange rate, as it compares the currencies of two different nations.

A market based exchange rate will change whenever the values of either of the two component currencies change. A currency will become more valuable whenever demand is less than the available supply of a currency. For this reason it is important to stay up to date on foreign exchange rates if you will be exchanging large amounts of money from one currency to another.

There are many helpful tools and currency converters available online. Simply use one of the major search engines to find a website with this type of service. All of the well known financial institutions’ websites have current foreign exchange rate information. In fact, you may find it simplest to go to the website of whichever bank you use in order to access this information.

When traveling, it is a good idea to get a feel for how the foreign exchange rate has been fluctuating in the areas that you will be traveling to. If you notice a pattern of ups and downs, wait until the next fluctuation that is in favor of the direction of your currency conversion before changing large amounts of money from one currency to another.

If you are traveling in Europe, you may as well convert your dollars to Euros as soon as possible, preferably during a period of the increased exchange worth. While traveling Europe, the cost of your trip will depend more on how long you stay in certain places, as travel expenses vary greatly between large metropolitan areas and lesser traveled countries and rural areas.

People also make money off of the changing foreign exchange rates similar to how stocks and bonds are traded. Foreign exchange markets are usually highly liquid as the world’s primary international banks provide a market around the clock. The Bank for International Settlements reported that global foreign exchange market daily turnover averages in April 1998 were approximately $650 billion.

The largest foreign exchange trading center is London, followed by New York City and then Tokyo. The largest international banks continuously provide the market with both ask and bid prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell and the price at which a market-maker will buy from a whole sale customer.

There is not a single unified foreign exchange market. Because of the over-the-counter nature of foreign currency markets, there are instead a number of interconnected marketplaces where various currency instruments are traded. There is no such thing as a single dollar arte, but instead a number of different rates depending on what market or bank is trading.

Deon Melchior is the Editor and Publisher of Article Click. For more FREE articles for your ezine and websites visit ArticleClick.com. Article Click is a free content article directory. This means that as a publisher you may reprint the articles that are included in our site, as long as the article is unedited and the author box is included with it's live hyperlinks.