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new to forex

What is Forex??

Exchange rate is the relative value between two currencies. Simply put by The Balance: “Exchange rates are the amount of one currency that can be exchanged for another.”

How do I calculate the exchange rate?

Calculating the exchange rate is simple, but can be changed on a day-to-day basis. As an example: say, the euro exchange rate is 0.825835. This means that one US dollar buys, or can be exchanged or is “worth” 0.825,835 euros.

In order to find out how much two euros are worth in US dollars, divide 1 (as in one dollar) by 0.825835 to calculate how many US dollars a euro is worth: 1.21 dollars. Therefore:

1 USD = 0.825835 Euros
1 euro = 1.21090 US dollars
By using the exchange rate, you can see that $ 1 is equal to just over 80 euros. Two US dollars equals about 1.65 euros, while two euros equals about $ 2.40 in US currency.

Of course, there are easier ways to determine the exchange rate in the country you are visiting. Website and currency applications, such as the XE Currency Converter and the current exchange rate calculator, can help you make smart decisions about your money before and during your trip.

What can affect the exchange rate?

Flexible exchange rates can change from day to day, but are often in very small increments of less than one cent.

But major economic factors, such as government shifts or business decisions, can have an impact on international exchange rates.

For example, consider the changes in the US dollar between 2002 and 2015. When the US national debt increased significantly between 2002 and 2007, the US dollar depreciated against its international counterparts. When the economy entered the “Great Recession”, the dollar gained some strength back as large corporations kept their wealth.

When Greece was on the brink of economic crisis , the euro weakened in value. In turn, the US dollar has risen sharply, giving Americans more purchasing power in the European Economic Area. Britain’s vote in a referendum to leave the European Union has pushed the dollar even further , pulling it closer to even the British pound.

International situations can have a major impact on how much the US dollar is worth abroad. By understanding how these things can change your overseas purchasing power, you can quickly make decisions about when to exchange your local currency money or keep it in US dollars and spend it with your credit or debit card.