Currency Exchange 101
Understand the fundamentals of currency exchange and make better decisions on your next international transfer.
Whether you're moving abroad, buying a foreign property, or traveling to another country, currency exchange can have a big impact on your wallet. Understanding the foreign exchange market, currency rates, and foreign exchange fees can help you take advantage of the best rates when transferring money abroad.
The Foreign Exchange Market
When you exchange your money online, at the bank, or at a currency booth, you are participating in the foreign exchange market.
The market, also known as the forex or FX market, determines the relative values of currencies. Every day, an estimated $3.5 - $5 trillion US dollars are transacted on the forex market, making it the largest financial market in the world. The market operates all across the globe, and you can exchange foreign currencies 24/7.
From another country and curious to know how much $3.5 - $5 trillion US dollars would be in your currency? Use our currency converter to find out.
Currency Pairs and Rates
Currencies are quotes and traded in pairs. Each currency pair has a base currency and a counter, or quoted, currency. The most traded currencies include: USD, EUR, JPY, GBP, AUD, CHF, and CAD. Let's break down currency pairs even further.
You might see pairs such as EUR/USD. In this case, EUR is the base currency and USD is the quoted currency. If EUR/USD = 1.13, then this means 1 euro is equal to 1.13 US dollars.
Suppose you travel to Europe with US dollars. A foreign exchange provider would sell you euros at the sell price, the rate at which a foreign exchange provider will sell currency to you.
Commission
If a rate is advertised at mid-market (with no mark-up), then a commission is likely charged. Currency providers may charge a flat fee, commission fee, handling fee, or minimum transaction charge.
Transfer Fees
Transferring funds by wire may be faster but typically involves a fee. Some FX providers offer cheap or even free money transfer methods like EFT or ACH when available.
How does Xe make money? Typically, our customers will be charged a small transfer fee and margin. If you want to see for yourself just how small our fees are, Get a quote.
