An exchange rate is the price of one currency in another: if 1 euro costs 1.12 US dollars, the EUR to USD rate is 1.12 and the USD to EUR rate is 1 ÷ 1.12 ≈ 0.89. The rate you see in the news or a converter is usually the mid-market rate, halfway between the prices at which banks buy and sell. When you exchange money, the bank or exchange service sells to you at a slightly worse rate and often adds a fee, which is why you get less than the headline rate suggests. This guide explains how rates are quoted, where reference rates such as the European Central Bank's come from, how cross rates are calculated, what moves currencies and how to avoid poor rates.
- A rate written EUR/USD 1.12 means 1 euro = 1.12 US dollars. The reverse rate is 1 divided by it.
- The mid-market rate sits between the buy (bid) and sell (ask) prices. Providers earn the gap, called the spread, plus any fees.
- Reference rates, such as the European Central Bank's, are one official snapshot per working day, published for information.
- Rates between two currencies that are not quoted directly are cross rates, calculated through a common currency such as the euro or the dollar.
- To pay less, compare the total amount you receive, pay in the local currency abroad and avoid exchanging cash at airports.
How exchange rates are quoted
A currency pair is written with two ISO 4217 codes, for example EUR/USD or GBP/INR. The first is the base currency and the second the quote currency: the rate tells you how many units of the quote currency one unit of the base currency buys. So GBP/INR at 125.9 means £1 = ₹125.9.
The same rate can be written either way round. If EUR/USD is 1.12, then USD/EUR is 1 ÷ 1.12 = 0.8929. Both describe the same price; which one is "normal" depends on the market and the country. Many countries quote foreign currencies as the price of one foreign unit in local money (1 USD = 95 INR in India), while the euro and the pound are traditionally quoted as the base (1 EUR = 1.12 USD, 1 GBP = 1.32 USD).
| Written as | Means | Reverse rate |
|---|---|---|
| EUR/USD 1.1208 | 1 euro = 1.1208 US dollars | 1 dollar = 0.8922 euro |
| USD/JPY 157.98 | 1 US dollar = 157.98 yen | 1 yen = 0.006330 dollar |
| GBP/INR 125.92 | 1 pound = 125.92 rupees | 1 rupee = 0.007942 pound |
The figures in this table are the European Central Bank reference rates of 15 October 2026 (the dollar–yen and pound–rupee figures are cross rates calculated from them). They are examples, not current prices: use the currency converter for today's rates.
The mid-market rate and the spread
Every currency has two prices at any moment: the price at which dealers will buy it (the bid) and the slightly higher price at which they will sell it (the ask or offer). The mid-market rate is the midpoint between the two. It is what converters, financial news and reference rates show, but nobody actually trades at it as a retail customer.
The difference between the buy and sell price is the spread. Between large banks trading major currencies it is tiny, a fraction of a hundredth of a percent. For a person changing money it is much wider, because the provider has costs, takes risk and wants a profit. A simple illustration with made-up round numbers: if the mid-market rate is 1 EUR = 1.1200 USD, a bank might sell you dollars at 1.0950 per euro and buy them back at 1.1450. Change €1,000 and you receive $1,095 instead of the $1,120 the mid-market rate suggests: a margin of about 2.2%, before any separate fee.
That is why a provider advertising "0% commission" is not necessarily cheap. The cost is in the rate. The only fair comparison is the total amount that arrives, after the rate and every fee.
Reference rates: one official snapshot a day
Currency markets trade around the clock from Monday morning in Asia to Friday evening in New York, so the market rate changes every second. For contracts, statistics and accounting, people often need one agreed rate per day instead. Central banks publish such reference rates.
The best known is the euro foreign exchange reference rate of the European Central Bank (ECB). The ECB sets rates for about 30 currencies against the euro from a regular exchange of information between central banks, normally at around 14:10 Central European Time, and publishes them around 16:00 CET on every working day. There are no new rates on weekends or on the days the TARGET payment system is closed, such as Christmas Day and New Year's Day. The ECB publishes the rates for information purposes only and discourages using them for transactions.
Other central banks publish their own reference or indicative rates for their currency, for example the Bank of Canada for the Canadian dollar, the Central Bank of the Republic of Türkiye for the lira and, for the Indian rupee, Financial Benchmarks India. Because each is set at a different time of day, two reference rates for the same pair can differ slightly. Our converter uses the ECB rates throughout, so every pair comes from one consistent source.
Cross rates: converting through a third currency
Not every pair is quoted directly. The ECB, for instance, quotes every currency against the euro only. To find the rate between two other currencies, you go through the euro: one unit of A in B equals the euro rate of B divided by the euro rate of A. This is a cross rate.
Worked example with the ECB rates of 15 October 2026: 1 EUR = 106.5408 INR and 1 EUR = 0.84610 GBP. So 1 GBP = 106.5408 ÷ 0.84610 = 125.92 INR, and 1 INR = 0.84610 ÷ 106.5408 = 0.007942 GBP. Markets use the same arithmetic, usually through the US dollar, which sits on one side of most foreign exchange trades. A cross rate calculated from two reference rates can differ very slightly from a direct market quote for the same pair taken at another moment, but the difference is normally tiny.
What moves exchange rates
A currency's price is set by supply and demand, and many forces feed into that. Economists still find exchange rates hard to forecast over months, so treat any confident prediction with caution. The main drivers are:
- Interest rates. Higher interest rates (or expected rises) tend to attract investors to a currency, and cuts tend to weaken it, all else being equal. That is why currencies often move when a central bank announces a decision.
- Inflation. Over long periods, currencies of countries with persistently higher inflation tend to lose value against those with lower inflation, because each unit buys less.
- Trade and capital flows. Exporters selling abroad and foreign investors buying local shares or bonds need the local currency; importers and investors moving money out sell it.
- Growth, politics and risk. Elections, crises and economic data change expectations quickly. In turbulent times investors often buy currencies seen as safe, such as the US dollar, the Swiss franc or the Japanese yen.
- Central bank policy and pegs. Some currencies float freely; others are managed or fixed. The Hong Kong dollar, for example, is kept in a band of 7.75 to 7.85 per US dollar, and the Danish krone is kept close to its central rate against the euro within the European exchange rate mechanism (ERM II).
Why your bank, card or exchange office gives a different rate
- The spread. As above, providers sell to you below the mid-market rate. Margins are usually smallest with online transfer services and largest for cash at airports, hotels and tourist areas.
- Fees. A fixed transfer fee, a percentage "foreign transaction fee" on card payments or a cash withdrawal fee comes on top of the rate.
- Card network rates. When you pay by card abroad, the card network converts the amount at its own daily rate and your bank may add its foreign transaction fee.
- Dynamic currency conversion. Card terminals and cash machines abroad often offer to charge you in your home currency. The conversion is then done by the merchant's provider at its own rate, which is often worse than your card's. Choosing to pay in the local currency usually costs less.
- Timing. Rates move during the day, and some providers widen their margin at weekends while the markets are closed.
Practical tips for getting a fair rate
- Check the mid-market rate first with a currency converter, so you can judge any offer.
- Ask for, or calculate, the amount you will receive. Divide it by the amount you send to see the effective rate, and compare that with the mid-market rate to see the real cost in percent (the percentage calculator does the difference for you).
- Pay and withdraw in the local currency when abroad, and avoid exchanging large amounts of cash at the airport.
- For large transfers, compare a few providers on the same day: a difference of 1% on a house deposit or a year's school fees is a lot of money.
- Do not try to time the market with money you need on a certain date. Nobody reliably predicts short-term moves.
Popular pairs have their own pages with conversion tables and the 30- and 90-day range, for example USD to INR, EUR to USD, GBP to EUR and GBP to INR.
Frequently asked questions
What is the mid-market exchange rate?
The midpoint between the price at which banks buy a currency and the price at which they sell it. It is the fairest single measure of a currency's value at a given moment, and the rate shown by most converters and by central bank reference rates, but consumers rarely get it when they exchange money.
How do I calculate the reverse of an exchange rate?
Divide 1 by the rate. If 1 EUR = 1.12 USD, then 1 USD = 1 ÷ 1.12 = 0.8929 EUR. To convert an amount, multiply by the rate in one direction or divide by it in the other.
Why are exchange rates different on different websites?
Some sites show a live market rate that changes every second, some show a daily reference rate such as the ECB's, and banks show their own buy and sell rates with a margin included. They are all "correct" for what they describe, so check which kind of rate you are looking at.
When is the best time to exchange money?
There is no reliable best time, because short-term currency moves are very hard to predict. Saving 1–3% by choosing a provider with a small margin, and avoiding dynamic currency conversion, usually matters more than timing.
What is a cross rate?
A rate between two currencies calculated through a third. With euro reference rates, 1 unit of currency A in currency B is the euro rate of B divided by the euro rate of A, for example GBP to INR = (EUR to INR) ÷ (EUR to GBP).
Are central bank reference rates used for real transactions?
The ECB publishes its reference rates for information and advises against using them for transactions. Businesses sometimes use them for accounting or in contracts that name them explicitly; check what applies to you.