As you start to plan a trip abroad, you may start to see a lot of information about exchanging currency and foreign exchange rates. What does all of this mean and why is it important? Well, we will tell you! Here is all you need to know about foreign exchange rates before you travel.
What is an Exchange Rate?
In a nutshell, an exchange rate is the value of one currency when compared to another currency. When you want to make one currency into another, say AUD to USD, the exchange rate will affect how much USD you get from your AUD. If the exchange rate is .80, for example, you will get .80 for every 1 AUD.
Does the Exchange Rate Change?
This question is a little tricky as some exchange rates do change while others are fixed to the US Dollar. If a currency is fixed to the US Dollar, it will always be essentially the same as the dollar. So, for example, Hong Kong has set its currency to the USD meaning one Hong Kong Dollar will always equal one USD.
Other currencies will fluctuate frequently based on the country’s economy in comparison with the rest of the world. When you are considering converting your currency, it is a good idea to check the countries exchange rate daily as the rate may vary dramatically from day to day, changing based on world events, political issues or even weather related occurrences.
Impact On Tourists
If you are planning a trip overseas where you will need a different currency, the exchange rate will have an effect on you and your trip. If your native currency is less than the other countries currency then your trip will prove to be more expensive than you may have planned. You will have to spend more of your domestic currency in order to buy the same amount of foreign goods.
If your native currency is more than that of the country you are visiting, the trip may seem cheap or discounted. You will be able to get more bang for your buck! While there isn’t much you can do about the exchange rate in comparison to where you live, you should definitely take it into consideration when budgeting for your trip so you have realistic expectations of what you will be able to afford.
There are a few different ways to exchange your money while traveling. You can even convert your money before you travel, stopping by your local bank and asking them to exchange your AUD to USD. While abroad, you can opt to exchange your money at a bank where you can purchase cash, you can withdraw money from an ATM, you can find currency conversion companies and stores or you can travel with traveler’s checks, cashing them anytime you need more money. All of these methods of currency exchange will still be effected by the current exchange rate so it is a good idea to keep an eye on that number while you travel. You never know when it may change!
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