How to Convert the Money Rate

Foreign exchange facilitates trade and capital flows between countries

Most countries of the world have their own currencies. International trade and capital flows are facilitated by currency exchanges. When currencies are exchanged, the amount of one currency (currency A) needed to buy a unit of another currency (currency B) is called the exchange rate. The reverse exchange rate can be calculated by dividing 1 by the exchange rate of currency A against currency B. The reverse exchange rate will show the amount of currency B needed to buy a unit of currency A.

Instructions

1. Identify which currencies you need to convert and find out their exchange rates. You can get the exchange rates from financial intelligence agencies such as Bloomberg or Reuters.

2. Find out which way you need to convert your currency. The exchange rates are given in the form of currency A/currency B ratio, which specifies how much currency B you need to buy a unit of currency A. For example, EUR/USD of 1.2009 means that you need 1.2009 dollars to buy one euro.

   If you need to know the reverse rate, divide 1 by this exchange rate.

3. Convert the currencies. Multiply the exchange rate of the currency in question by the amount you need. For example, if you need to buy 1000 euros and the EUR/USD exchange rate is 1.2009, you will have to sell 1200.9 dollars.

References

• The Federal Reserve Bank of New York: Foreign Exchange
• Blomberg: Benchmark Currency Rates