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Exchange rates fluctuate daily based on the value of a country’s currency, which is affected by anything from political changes to market news. We also list our historic rates here, helping you to understand whether or not it’s a good time to buy your currency.
Why do exchange rates change?
Exchange rates fluctuate due to one major factor: global demand and supply. The more in-demand a particular currency is, the more its value will increase. Factors that affect demand and supply of currency include governments and businesses trading internationally, countries’ political and economic stability, travel and tourism, trading of currencies on the stock market and even natural disasters.
Exchange rates are also influenced by countries’ rules and actions that govern their currency, known as their fiscal policy. Interest rates play a large role in exchange rate fluctuation. Favourable interest rate movements will drive demand for a particular currency – driving up its value.
How to calculate exchange rates
Exchange rates are influenced by banks and trading institutions and the volume of currency they are buying and selling at any given time. Currencies are traded (bought and sold) daily around the world. One currency can be purchased by another currency through banking institutions or on the open market. The volumes of currencies traded are increased and decreased depending on the attractiveness of any particular currency, which depends on a multitude of factors such as political stability, economic strength, government debt and fiscal policy among others.
Government central banks also have the ability to set a currency at a constant price through a method called pegging, which essentially tethers the value of one currency to another. The value (or price) of a currency is determined by its traded volume. If a currency is competitively priced, traders will buy the currency, essentially driving up its value. If a currency is not competitively priced, traders may avoid buying, or even sell it, essentially driving down its value.
Exchange online with Travelex in 3 easy steps
- 1. Choose your currency
Select the amount of money you need to exchange and the country that you’re visiting
- 2. Choose home delivery
Your currency can be delivered safely to your door, or you can pick up from one of our locations at Calgary Airport.
- 3. Pay online
Pay for your foreign currency quickly and securely with either your debit card or credit card
A simple guide to understanding currency jargon
There’s no doubt that foreign exchange can be a confusing subject, especially with all those industry terms that get thrown around. Here we break down some of the most common terms, giving you a better understanding of all things currency.
Market/spot rate: This is the rate that banks or large financial institutions charge each other when trading huge amounts of foreign currency. It’s also known more formally as the ‘interbank’ rate.
Spread: This is the difference between the buy and sell rates offered by a foreign exchange provider such as us.
Sell rate: This is the rate at which we sell foreign currency in exchange for local currency. For example, if you were headed to the UK, you would exchange your Canadian dollars for British pounds at the sell rate.
Buy rate: This is the rate at which we buy foreign currency back from you and exchange it into your local currency. For example, if you were returning from the UK, we would exchange your British pounds back into Canadian dollars at the buy rate of the day.
Vacation money rate or tourist rate: This is another term for a sell rate.
- Why do currency exchange rates fluctuate?
Currencies constantly move up and down against each other as financial markets change. These movements can be caused by supply and demand, as well as by political and economic events.
- Why are tourist money exchange rates not the same as the market spot rate?
The market (or spot) exchange rate, is the rate at which banks exchange currencies. There are a lot of processes and people involved in providing currency into your hands. There is a cost to doing this, which means that the value of the currency is affected to cover all of said cost.
At Travelex, we constantly improve our systems and processes so we can provide you with great currency exchange rates.