Travelling to foreign locations is exciting and adventurous. However, the term dreaded by most of the travelers is foreign exchange. It is very important to know some basic information about exchange rates before you travel abroad.
The first term to know is foreign exchange rate. It is the value of one currency in terms of the other currency. For example, it is the amount of Canadian dollars you can buy with one U.S. Dollar. The exchange rate keeps fluctuating. You can know about the prevailing rate through a bank or a reputed currency exchange in your city.
Some countries like Cuba and China have a fixed exchange rate. The value of their currency is fixed in terms of the U.S. Dollars. Most of the foreign exchange rates are flexible. They keep changing on a minute to minute basis depending on the economic and political factors and the market dynamics. The foreign exchange rate is determined by the forex markets, where central banks, brokers, trader, fund houses and investors trade in different foreign currencies. It is important to know whether the country you are visiting has a fixed or a flexible exchange rate, beforehand. You can choose the way you spend money in the foreign location depending on this.
Most of the times, the changes in exchange rate are very minor. You will see a difference of a couple of cents during your entire trip. However, some major economic and political situations can cause huge dips or raises in the forex value of a currency. For example, when Greece went into economic meltdown, the value of Euro decreased in terms of USD. It resulted in an increase in the spending power of Americans visiting the European Union. In the same way, Britain’s exit from the European Union caused a hike in the value of U.S. Dollar. Understanding important economic and political conditions and their effect on the exchange value of the currency helps you to determine, when to exchange your currency and when to use credit or debit cards.
It is important for every traveler to know about the exchange rate of the foreign currency. It will help you to plan and budget your trip accordingly. You can get best deals on exchange rates at a trustworthy and reputed currency exchange in your city. Do your homework and get the best exchange rate for your money before you travel abroad.