What is an exchange rate? A simple guide with examples

An exchange rate tells you how much of one currency you receive for one unit of another. If 1 USD equals 0.90 EUR, then 100 USD has a reference value of 90 EUR before fees.

Read the direction first

The first currency is the one you start with. The second is the one you want to receive. USD to EUR and EUR to USD describe different calculations, even though they involve the same two currencies. Always read the words around the number instead of comparing numbers on their own.

One rate, two directions

In our example, 1 USD buys 0.90 EUR. To find the reverse rate, calculate 1 divided by 0.90: approximately 1.1111 USD for one euro. The two rates do not need to look similar. One is the reverse of the other.

What a rate means for your money

Multiply the amount you have by the rate in the correct direction. With an example rate of 0.90 EUR per USD, 250 USD becomes 225 EUR. If the rate changes to 0.92, the same 250 USD becomes 230 EUR. You receive five more euros before any charges.

• Check which currency you are selling.
• Check which currency you will receive.
• Check the rate date and the final amount after fees.

Reference rate or actual exchange quote?

A reference rate is a useful measuring point. A bank, card company or cash counter can quote a different rate and charge fees. That does not automatically mean the reference calculation is wrong: it answers a different question. The reference shows an estimated value; the provider tells you what a particular transaction will deliver.

Try 100 USD to EUR and the reverse EUR to USD calculation. Our pages display the observation date and do not perform the exchange.

Common questions

Is the highest rate always best?

Only compare the same direction and include fees. Receiving more euros for the same total dollar cost is better for that conversion; a quote in dollars per euro needs a different comparison.

Can I spend the reference value?

Not necessarily. The available amount depends on the provider's final quote, possible limits and charges. Use the calculator to check the arithmetic, then check the transaction details.

Source and further reading

European Central Bank: the role of exchange rates. Examples in this article use made-up rates for explanation, not current offers.