Exchange rates

For the average person exchange rates are not all that important. They are something they only worry about when they go on holiday and have to exchange currency to give them their spending money.

However, if you are a business that trades internationally the exchange rate is critical. How much you make on a deal can be strongly influenced by the exchange rate.

If you are not careful one week you can be making money on a product whilst just a month later you can actually begin to lose money on that same product. This can all be down to how much you pay for your raw materials or how much you are paid for your finished products.

Types of Exchange Rates

There are numerous kinds of exchange rates. However, for businessmen and women the most important of these are currency exchange rates. There are several kinds of currency exchange rates, however for most businesses the most important is the interbank foreign exchange market rate. This is the standard exchange rate most banks use. There are three basic kinds of the interbank foreign exchange rates.

The first two are the spot market and forward market rates, which do not really impact on your average businessman or woman. Rather it is the third rate, which is called the SWIFT rate they need to understand and keep an eye on. SWIFT stands for Society for Worldwide Interbank Financial Telecommunications. It is the SWIFT rate that is used by banks across the world when they exchange currency and send it between each other.

How to Monitor the Exchange Rates

If you only occasionally carry out foreign currency exchanges, simply asking the bank the rate at the time of the transaction is fine. However, if you regularly carry out transactions between currencies you should monitor the exchange rates on at least a daily basis. That way you can carry out large transactions when the currency rates are in your favour. By doing so you can save yourself and your business large sums of money. The easiest way to do this is on-line.