Exchange Rates and Currency Exchange

This page discusses how to calculate currency exchange rates and exchange rates. An exchange rate is the value of a state's currency's value compared to another state's. In addition to the rates we examined previously, there are other exchange rates, known as the onshore and offshore rates. An onshore rate favors the national currency traded within its borders. In contrast, an offshore rate is slightly higher for national currency traded outside the state's borders. What is the relationship between restricted currency and the offshore exchange rate?

Exchange Rates and Currency Exchange

You have set aside $6,000 in Canadian funds toward hostel costs during a long backpacking trip through the United States, Mexico, and Europe. After searching on the Internet, you decide to use Hotwire.com to reserve your hostel rooms. The website quotes you the following amounts for each country: 1,980 US dollars, 21,675 Mexican pesos, and 1,400 euros. Have you allocated enough money to cover these costs?

Whether you are a consumer backpacking around the world on distant vacations, investing in international securities, or shopping online at global Internet sites, you must pay for your purchases in local currencies out of your Canadian currency accounts. Businesses are no different as they export and import products to and from other countries. With outsourcing on the rise, it is also common for business services such as call centers and advertising agencies to be located abroad along with manufacturing facilities. Large-scale companies may have operations in several countries throughout the world.

All of these transactions and operations require the conversion of Canadian currency to a foreign currency or vice versa. This section shows you the basics of currency conversion rates and then explores finer details such as charges for currency conversion and what happens when one currency gets stronger or weaker relative to another.

Source: Jean-Paul Olivier, https://math.libretexts.org/Bookshelves/Applied_Mathematics/Business_Math_(Olivier)/07%3A_Accounting_Applications/7.03%3A_Exchange_Rates_and_Currency_Exchange
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