How to Calculate Exchange Rate: 9 Steps (with Pictures) - wikiHow (2024)

FAQs

What is the formula for calculating exchange rates? ›

If you don't know the exchange rate, you can use the following simple currency conversion calculation to find it: take your starting amount (original currency) and divide it by ending amount (new currency) = exchange rate.

Calculating an FX rate: The formula

Calculate an FX rate using this simple formula: Your starting figure (in your local currency) divided by the final number (in the new foreign currency) = the exchange rate.

Know the country's exchange rate before you travel – these are usually posted online and at banks, airports and currency exchange shops. If you don't know the exchange rate, you can use this formula: starting amount (base currency) / ending amount (foreign currency) = exchange rate.

If the German price is 2.5 euros and the U.S. price is $3.40, then (1.36) X (2.5) ÷ 3.40 yields an RER of 1. But if the German price were 3 euros and the U.S. price $3.40, the RER would be 1.36 X 3 ÷ 3.40, for an RER of 1.2.

Multiply the money you've budgeted by the exchange rate. The answer is how much money you'll have after the exchange. If "a" is the money you have in one currency and "b" is the exchange rate, then "c" is how much money you'll have after the exchange. So a * b = c, and a = c/b.

The exchange rate gives the relative value of one currency against another currency. An exchange rate GBP/USD of two, for example, indicates that one pound will buy two U.S. dollars. The U.S. dollar is the most commonly used reference currency, which means other currencies are usually quoted against the U.S. dollar.

Conversion rates are calculated by simply taking the number of conversions and dividing that by the number of total ad interactions that can be tracked to a conversion during the same time period. For example, if you had 50 conversions from 1,000 interactions, your conversion rate would be 5%, since 50 ÷ 1,000 = 5%.

An exchange rate is the rate at which one currency can be exchanged for another currency. Most exchange rates are defined as floating. They'll rise or fall based on supply and demand in the market. Some exchange rates are pegged or fixed to the value of a specific country's currency.

This method calculates the average exchange rate for these transactions as a result of dividing total amount of all earlier transactions in the foreign currency by total amount of all earlier transactions in the accounting currency. The resulting exchange rate is then assigned to outgoing transaction.

Fisher's equation of exchange is MV=PT, where M = money supply, V = velocity of money, P = price level, and T = transactions. When T cannot be obtained, it is often substituted with Y, which is national income (nominal GDP).

What is the formula for the effective exchange rate? ›

REER = (NEER * CPI Domestic) / (CPI Foreign)

REER stands for Real Effective Exchange Rate. NEER signifies Nominal Effective Exchange Rate. CPI Domestic refers to the Consumer Price Index of the domestic nation. CPI Foreign represents the Consumer Price Index of the foreign country/countries in the currency basket.

It is easy to confuse whether you need to multiply or divide by the exchange rate. One way to remember is with the rule: If you are going from the “1” to the other currency then multiply. If you are going to the “1” from the other currency then divide.

To calculate the exchange rate, multiply the value of one currency by the corresponding value of another currency. For example, to find out how many US dollars you would get for 100 euros, you would multiply the value of 100 euros by the exchange rate between euros and US dollars.

For example, an AUD/USD exchange rate of 0.75 means that you will get US75 cents for every AUD1 that is converted to US dollars.

For a dollar investor, the rate of return on a foreign deposit depends on the foreign interest rate, the spot exchange rate, and the exchange rate expected to prevail at the time the deposit is redeemed: In particular, R o R £ = E $/£ e E $/£ ( 1 + i £ ) − 1 .

the core equation is ReR=eP*/P, where, in our example, e is the nominal dollar-euro exchange rate, P* is the average price of a good in the euro area, and P is the average price of the good in the United States.