# Pence to Pounds to Dollars Conversion

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The tourists and businesspeople that travel to and from Great Britain and the United States have to exchange their money for the local currency before they can go shopping or even stop at a restaurant for a bite to eat. After you’ve swapped currencies, it’s still useful to know how to convert pence and pounds to dollars, and vice versa. For example, a quick conversion might tell you that a meal in London costing 10 pounds is equivalent to 16 or 17 dollars. That information is a big help in managing spending and staying within your budget.

## Floating Currencies

• The relative value of pounds and dollars “floats,” meaning it is determined by supply and demand as the currencies trade on the foreign exchange market and changes constantly. The British pound is divided into 100 pence just as the dollar consists of 100 cents. This is a much different system than was used before the 1970s. Both currencies were based on precious metals. The dollar’s value was determined by specified weights of gold or silver. A pound consisted of 20 shillings, each of which was worth 12 pence. One pound by weight of sterling silver equaled 240 pence. This system was simplified in 1971. Now converting pence to pounds is very easy. For example, 37 pence equals 37 percent of one pound.

## Currency Quote Format

• Since the relative value of pounds and dollars changes depending on the currency market, you must check the current exchange rate before you can convert one to the other. Exchange rate quotes are easy to find. They are available on numerous financial websites. The pound is customarily listed first, so a quote looks like this: GBP/USD 1.6000. As the first currency, the pound is referred to as the base currency. A base currency is always equal to one unit. Thus, this example means one pound buys \$1.60 in U.S. currency.

## Converting British Pounds to U.S. Dollars

• Suppose you are shopping in London and you see a souvenir priced at 10 pounds and 50 pence. You want to get an idea of how much that comes to in dollars and cents. When you exchanged your U.S. currency for British money, the exchange rate was GBP/USD 1.600. To convert pounds to dollars, simply multiply the amount by the exchange rate. You have 10.50 pounds multiplied by 1.60, so the price of the souvenir in U.S. currency is \$16.80.

## Converting Dollars to Pounds

• When you set out on a trip to England, you need to convert U.S. currency to British pounds and pence. For example, you might decide to start your trip with \$250 in British currency. To convert, divide U.S. dollars by the exchange rate. If the rate is GBP/USD 1.6000, you have \$250 divided by 1.60, which comes to 156.25 or 156 pounds and 25 pence.

## References

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