What Is The Need For a Currency Exchange Rates Calculator? A Beginners Guide to FOREX

The Foreign exchange market is an international over the count market that deals with money transactions across currencies. For a beginner, this can be a difficult concept to understand.

Imagine that you wish to by some food worth 5 US dollars in New York and you are basically from London. If you were to have only pounds with you, you cannot buy anything in the USA with that. This is because the national currency in USA is dollars and not pounds. This is one of the common instances that require currency conversion.

On the other hand, the FOREX market is an international arena where exchange of currencies takes place. In other words, one currency can be bought with another currency. For instance, USD dollars can be bought with UK pounds and vice versa.

The denomination in a particular currency that is required to buy one unit of another currency is generally called the exchange rate. For instance, if 1 USD is equivalent to 45 Indian Rupees, this is the exchange rate that is expressed as a figure with decimals for instance 45.6877 in INR or 0.0218877 in USD.

These exchange rates are subject to change as the relative value of different currencies in the monetary market keeps changing. That is where currency exchange rates calculator comes into the picture.

A currency exchange rates calculator helps calculate the exchange rates for different currencies and is used commonly in the FOREX trade market to calculate current rates at which currency exchange transactions will be made.

Currency exchange rates calculator helps you figure another major aspect that is involved in currency exchange transactions that can help you maximize the profits. Let us assume that the current exchange rate for American dollars vs. Indian rupees is 45. This means that if you sent 1 USD from your account in US to your Indian account, you would now have 45 rupees in your bank account in India.

Let us imagine that the value of INR increased with respect to USD after you made this transaction. Now, the exchange rate for American dollars vs. Indian rupees has changed from 45 to 55. In other words, your currency exchange rates calculator is telling you that if you transfer 1 USD from your bank account in USA to your Indian account you would have 55 Rs in your Indian bank account.

This means that you have incurred a loss of 10Rs by transacting earlier, when the exchange rate was lower than it is now.

This is how you need to understand the need for currency exchange rates calculator that is used to calculate exchange rates for other currencies as well.