Exchange rate
a.k.a. FX rate, Rate
The price of one currency in terms of another: how much of the quote currency one unit of the base currency costs.
An exchange rate is just a price. EUR/USD at 1.0850 means one euro costs 1.0850 dollars. In forex that rate is the price of a currency pair, and it twitches all day long.
Rates move because people want one currency more than the other. Interest rates, inflation, jobs data, elections and plain fear all tug on that rope.
Converting with a rate
- EUR/USD = 1.0850.
- €100 × 1.0850 = $108.50.
- Going the other way: $100 ÷ 1.0850 ≈ €92.17.
Bottom line: Divide to go from quote to base, multiply to go from base to quote.
Treating a rate as fixed. The rate on your holiday booking and the rate on the day you pay can be very different numbers.
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