How Exchange Rates Work

An exchange rate is simply the price of one currency expressed in another. When you see "1 USD = 0.92 EUR", it means that one US Dollar can be exchanged for 0.92 Euros at the reference rate. The rate moves because currencies are traded continuously on the global foreign-exchange market — the largest financial market in the world by daily volume.

Who sets the rate?

No single body sets exchange rates for floating currencies. The rate emerges from the combined buy and sell orders of thousands of banks, funds, exporters, importers, and travellers. Central banks influence it indirectly by changing interest rates and, in some cases, directly by intervening to buy or sell their own currency. As a benchmark, this site uses the reference rates published daily by the European Central Bank, which captures the consensus rate at a single reference time each Eurozone business day.

What actually moves a currency?

• Interest rates. Higher-yielding currencies attract investment, all else equal, so rate-setters like the Federal Reserve, European Central Bank, and Bank of England are the most-watched actors in FX.
• Inflation. A country with lower inflation tends to see its currency appreciate in real terms over time.
• Trade balances. A country exporting more than it imports sees net demand for its currency; chronic trade deficits tend to do the opposite.
• Risk sentiment. In risk-off episodes, investors often rotate toward safe-haven currencies like the US Dollar, Swiss Franc, and Japanese Yen.
• Political and economic events. Elections, war, sanctions, and unexpected economic data can drive sharp moves in either direction.

The rate you see vs. the rate you get

The rate quoted on this site — and on most consumer-facing converters — is the "mid-market" or "reference" rate: the midpoint between where banks bid and offer the currency on the wholesale market. You generally cannot transact at that exact rate as a retail customer. Banks, card networks, and money transfer services add a markup called aspread, often expressed as a percentage on top of the exchange rate. This spread can range from well under 1% for specialist online transfer providers to3–6% or more for traditional banks and card networks, often invisibly embedded in the rate itself rather than as an explicit fee.

To get the effective rate you will actually pay, the simplest comparison is: convert the same amount through two providers using the same reference rate (the one shown here), then compare the resulting amount each provider credits the recipient. The difference, divided by the reference amount, gives the real spread each provider is charging you.

Why the rate on this site changes daily

Because exchange rates reflect live market consensus, they change every business day, and sometimes within the day. This is why our converter fetches the latest reference rate each time the page loads, and why we label the result with a clear "last updated" date rather than statically rendering numbers that would age and become misleading.