Everyday money
Exchange rate: Definition, Formula and Example
An exchange rate states how many units of one currency exchange for one unit of another, with direction, date and pricing basis specified.
Scope: General financial concept; examples are hypothetical.
Other names and related labels: Currency conversion rate; Base and quote currency.
How it works
If one U.S. dollar buys 0.90 euros, the quote is 0.90 EUR per USD; the inverse is USD per EUR. Reference rates are informational and may differ from bank or card transaction rates because of spreads, fees and timing.
Converted amount = original amount × target-currency units per source-currency unit; inverse rate = 1 / rate
A positive rate and matching direction are required. Reciprocal quotes before costs are not the same as two actual executable buy/sell prices.
$100 at a hypothetical 0.90 EUR per USD
Use a manual rate with no costs.
- EUR received: $100 × 0.90 = €90.
- Inverse: 1/0.90 ≈ 1.111111 USD per EUR.
- At an illustrative 2% fee deducted from the €90 proceeds, net proceeds would be €88.20.
The fee-free conversion is €90; the separate hypothetical fee reduces it to €88.20.
Hypothetical manual rate, not a live quote; the fee example is separate from the calculator conversion.
Try these example inputsA saved reference rate is not a live transaction offer
Check the as-of date and direction. The Currency Calculator labels its saved-rate mode and manual mode; it does not promise a current dealing price or automatic inclusion of every provider fee.
Explore with a calculator
- Currency Calculator
Use an entered manual rate or inspect the explicitly dated saved reference rates.
Sources and checks
Definition and example arithmetic checked . Sources explain the concepts; numerical examples use the assumptions stated above.
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