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Suzanne Garber likes to joke that she had two passports by the age of 10 because her family moved so often. From a young age, living abroad was normal for Garber, since her father, an executive, frequently relocated internationally for business purposes.
These days, Garber, who lives in Philadelphia and is in her 40s, often travels for business and pleasure, sometimes spending a month at a time in various countries. As an avid traveler who has been to more than 70 countries — including places like Thailand, Algeria, Egypt and Brazil — she understands the importance of finding the best exchange rate.
It’s important for people to know the basics of reading a foreign exchange chart, she says, so they know what to look for and where to find the best exchange rate.
Here are three tips to help individuals master the art of reading foreign exchange rates.
All currency quotes have a buy or “bid” price (the rate a foreign exchange dealer will buy foreign currency) and a sell or “ask” price (the rate a foreign exchange dealer will sell foreign currency).
For example, during her recent trip to Singapore, Garber had to buy the Singapore dollar at a rate of $1 U.S. dollar to $1.19 Singapore dollars. In this case, if Garber exchanged $100 U.S. dollars, she would have received $119 Singapore dollars in return.
When a currency is quoted, it is done in relation to another currency. The first currency (the currency to the left of the slash) is called the “base currency,” and is the currency that someone is trading, i.e. buying or selling. The second number is called the “quote” or “counter currency.” For example, if a currency is quoted as EUR/USD 1.5557 that means €1 euro will buy $1.56 U.S. dollars. So if the quote changes from 1.5557 to 1.4322 that means the euro is weakening in relation to the dollar.
During Garber’s three-day trip to Singapore, the dollar weakened to USD/SGD 1.1222. Even with a lower sell price of $112 Singapore dollars, Garber was able to receive $112 U.S. dollars back at the end of her trip.
A “direct quote” is when the currency pair uses the domestic currency as the base currency. An “indirect quote” is when a currency pair uses the domestic currency as the quoted currency. If someone is looking to exchange Canadian dollars for U.S. dollars, a direct quote would be CAD/USD 0.72, which means $1 Canadian dollar would purchase 72 U.S. cents. For an indirect quote, USD/CAD 1.21 means that $1 U.S. dollar would purchase $1.21 Canadian dollars.
When Garber was exchanging U.S. dollars for Singapore dollars, a direct quote would have been USD/SGD 1.19276 — in other words, $1 U.S. dollar would purchase $1.19 in Singapore dollars. When Garber was returning to the U.S., a pairing of USD/SGD 1.22451 would have been an indirect quote where $1 Singapore dollar would only purchase 0.81665 U.S. dollars, so $100 Singapore dollars would equal $81.67 in U.S. dollars.
Regardless of how frequently an individual travels, it’s good to understand how to read foreign currency exchange rates. By taking the time to check rates and understand the fundamentals of exchange rate terminology, individuals can maximize the amount they’ll save when trading currency.
Example: 1USD = xx INR
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