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Exchange rates are important to a country’s economy because they affect the trade and financial flows across different countries. The exchange rate also affects how the Central Bank of the UAE and the Reserve Bank of India and conduct their monetary policies.
An exchange rate is the rate at which the currency of one country can be exchanged with the currency of another country or across different economic zones. The currency rate is an important economic variable that is used to determine the value of various currencies in relation to each other. Movement across the exchange rate influences the decision of businesses, individuals, and the government. Collectively as this can impact economic activity, merchandise trade, capital flows,inflation,interest rates and the balance of international payments.
Exchange rates are defined as the price that one country or economic zone’s currency can be exchanged for another current of another country or economic zone. These rates are
impacted by two factors:
These rates can be quoted either directly or indirectly or with the use of cross-rates.
- The price of a unit of foreign currency is directly quoted in terms of the number of units of domestic currency that are exchanged in direct quotation of exchange rates.
- The price of a domestic currency is expressed in terms of the number of units of foreign currency that are exchanged in an indirect quotation of exchange rates.
- Cross rates are a method of quoting exchange rates in which different foreign currency exchange rates are utilised to suggest a local exchange rate, for example, if you wanted to know the AED/INR exchange rate but couldn't get a direct quote. To calculate the AED/INR rate, one might utilise the AED/INR exchange rate and the AED/INR exchange rate.
The exchange rate of a currency is determined by the strength or weakness of the underlying economy. As a result, the value of a currency might fluctuate from one moment to the next. Many factors affect the exchange rate of a country.
Some of the reasons for the exchange rate to fluctuate are:
Every country or economic zone operates with their own currency. It is necessary while travelling abroad to gain this knowledge beforehand so that currency can be exchanged smoothly and correctly. Many hotels, restaurants, shopsaccept only their local currency and do not accept any outside currencies.
- To avoid getting cheated on or being ripped off by fraudsters or local merchants, make sure to know the ongoing exchange rate between your home currency and the local currency used. Do proper and through research on where currency can be exchanged in the place you are travelling to. Try finding the local branch of your preferred bank and be sure to confirm the conversion charges and services they offer. Find out which credit cards would offer you the best exchange value and be aware of the international transaction fee or the daily withdrawal limit, if any.
- It is always advisable to get your currency exchanged before your travel date. In case of stronger currencies, make sure to observe the exchange rate to confirm if they are decreasing or increasing, specially if the currency tends to fluctuate frequently. This would help you minimise your expenses and make the maximum benefit of the exchange rate
- The exchange rates often vary depending on the merchant you choose to exchange your currency. Make sure to compare different merchants to avail the best offer to minimise your expenses.
- In most international airports you are charged a commission fee anywhere between 10 and 15%. This can become extremely costly as there is no scope for bargaining. Hence, do your research and plan in advance to save a considerable amount that would have been otherwise spent on commission. Also be cautious of hotels and train stations abroad as they may also charge a very high commission at a lower rate
- One of the safest methods to carry money abroad is to follow the 30/70 approach. This refers to carrying 30% of your overall currency as cash and the remaining 70% as your forex travel card. It is better to have some local currency in hand. You can also maintain the rate of your forex travel cards since you load the card with the desired value in advance, thus being safe if the value fluctuates during your trip.
- To avoid risks and getting stranded in another country during an unfortunate event of misplacing your wallet or theft, it is advisable to have an extra forex travel card. Many forex card providers offer a spare forex card for such cases at a nominal price or for free. In unfortunate cases like these, you can avoid the hassles of acquiring a new forex card or getting emergency cash at a higher exchange rate.
Depending on your requirements and budget, you can opt to use a debit or credit card to carry large amount of money safely overseas. It is also important to carry some amount of cash for local places that may not accept digital payment. From multicurrency travel cards to traveller’s cheques, it is extremely easy to get your currency exchanged and use the desired medium. Do not rely on a single mode of payment and spread out your options to avoid any shortage in case of any emergencies or unfortunate events.It can be overwhelming to convert currency and carry a large amount of money in foreign currency. Our currency converter at SoulWallet converts the currency for you and gives you the ongoing exchange rate of your currency across other currencies. This makes it is easier for you to compare and be informed on the current value of your currency.