Types of Currency Rates

Banks have moved their pace high with the increase in the number of transactions. Now in banks you will find staffs that are proficient in English speaking and also are very familiar with assistance in international transfers. There are banks which charge on the money received in your account from the overseas banks while at certain cases rates may be negotiable or the customer is charged a fixed rate

Different Types of Currency Rates

Before opting for any of the substantial sums you must check the rates. If you are thinking of purchasing any property and for that looks for large money for that, then you must go for investigation. In this you can use a currency broker or you can also fix the exchange rates with the bank, in advance. Generally if a Tourist looks to exchange his/her traveler’s cheque against cash then he/she must check the exchange rates. This is because over the counter generally have a less beneficial rate for the travellers cheques while inter-bank transfer/exchange rates provides more.

There are many ways in which you can find the prices of exchange rates:

Spot Exchange Rate

1. Spot Exchange Rate – This is the exchange rate which is used as the real exchange rate for any currency and at the current prices of market. Mainly derived by the market called FOREX, based of flow of demand and supply of particular currency, this exchange rate used on a minute-by-minute basis of the exchange rate.

Bi-lateral Exchange Rate

2. Bi-lateral Exchange Rate – Very simple in calculation, this rate is based on the way in which you can trade one currency against the other one. For eg: Sterling/US Dollar.

Forward Exchange Rate

3. Forward Exchange Rate – This exchange rate is based on forward rate the currency will have in some fixed future time. Such exchange rate is generally fixed n used by business houses and banks which wants to reduce the risk of exchange rate uncertainty of the market.

Effective Exchange Rate Index

4. Effective Exchange Rate Index (EER) – This exchange rate is calculated with of sterling values’ weighted index with many international currencies. Then the proportion is determined based on the weights for proportionate trade between the United Kingdom and each country
5. Real Exchange Rate – This exchange rate is calculated based on a ratio of the indices of domestic price between two countries. Thus, a rise in the rate of domestic real exchange indicates deterioration of competitiveness in the international sphere for that country.

Bank exchange rate is beneficial for all governments, companies and individual traders.
Manipulating exchange rates with large reserves of foreign currency allows governments to stabilise the foreign exchange rates to provide a more favourable economic environment. While the companies and individuals are benefited with international transactions.

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1 GBP = 1.13292 EUR

1 EUR = 0.8827 GBP

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