How Currency Exchange Rates Work

When you travel or buy items internationally, understanding how currency exchange rates work can save you money. Here are the basics of global currency markets.

The Mid-Market Rate

The mid-market rate (also known as the interbank rate) is the midpoint between the buy and sell prices of two currencies. This is the "real" rate that banks use to trade with each other. It's also the rate you see on Unit Master.

Consumer Rates vs Mid-Market Rates

When you exchange money at an airport, a bank, or through a credit card, you rarely get the mid-market rate. Institutions add a "markup" or "spread" to the rate to make a profit. For example, if the mid-market rate is 1 USD = 0.90 EUR, the airport kiosk might only give you 0.85 EUR for your dollar.

Why Do Rates Change?

Currencies on the open market float freely against each other. Their value changes constantly based on:

• Interest Rates: Higher interest rates offer lenders higher returns, attracting foreign capital and causing the currency to rise.
• Economic Performance: Countries with strong economic growth tend to have stronger currencies.
• Inflation: Countries with lower inflation usually see their currency appreciate compared to trading partners.

Unit Master updates its currency rates hourly to give you a highly accurate estimate of the current mid-market value.