Exchange rate

We are talking about exchange rates in the case of products that can be traded. In such cases, prices are driven by the laws of supply and demand and are quoted from moment to moment.

Many things have an price. Such are stock market products, from shares to through bonds to raw materials. The price of electricity or gas is also are quoted on the free markets. We will now talk about the exchange rate of different currencies. 

The exchange rates of the currencies are quoted against each other, i.e. an exchange rate always expresses the price of two currencies in relation to each other. In the world, the exchange rate of the US dollar compared to the euro is most often heard. The exchange rate of the US dollar against the euro shows how many dollars we have to pay for one euro. This is most often described as: USD/EUR. 

Among the foreign exchange pairs (USD/EUR), the most frequently traded ones are usually used in reverse as well. So the EUR/USD exchange rate is also calculated. In such a case, the exchange rate shows how many euros must be sold for one dollar. 

There are two sides to the exchange rate of money. Those market players who deal with conversion do not do it for free for understandable reasons: they buy cheaper than they sell. This is how they make a profit. From this, however, it follows that there is a buy and sell rate. The middle rate is located somewhere in the middle between the two. The exchange institution buys the money from us at the buy rate. The at the exchange rate gives us the money we need at the sell rate. 

If, for example, the average USD/EUR middle rate is 1.02, while the buy rate is 1.01 and the sell rate is 1.03, then the bank buys one euro from us for HUF 1.01 and sells it for HUF 1.03.

If we talk about the exchange rate of money, we must distinguish between currency and exchange rates. We are talking about a currency exchange rate when we exchange cash for cash. It is a foreign exchange rate when we exchange a receivable for money. An example of the latter is when we transfer some amount of money from a bank account in dollars to a bank account in euros. When exchanging currency, the difference between the buy and sell rate rates is typically smaller than when exchanging currencies.  

Among the various exchange rates, the central bank's central middle rate plays an important role. This is usually the middle rate quoted by the countries' central banks. This is the basis of many official accounts and records, among other things, it must be taken into account when the company's tax accounts are prepared. 

The relative exchange rate of currencies is mostly determined by the economic situation of the given countries. In addition, central banks play a major role in the movement of exchange rates, which are able to influence exchange rates with their interest rate decisions.