how does foreign exchange work?
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Foreign Exchange works on the same principles as the stock market really.  There are people whose job it is to buy and sell currency, changing the value of those currencies.\n\nFor individuals going on holiday, the difference is not likely to make too much of a difference, but for companies that deal in multi-currencies, this can make a significant difference to income.  For example, as a company in the UK, with GBP(£) as your base rate, but invoicing companies in USD($)\n\nIf the exchange rate in the month is 1.82 $ to the £:\nOriginal invoice of $5,000 =  £2,747.26\n\nIf the invoice is paid in a later month when the exchange rate has dropped to say 1.78 $ to the £:\n$5,000 = £2,808.99\n\nThe Foreign Exchange Difference results in a gain of £61.73.  \n\nYou can see from this example how much of an impact a small change in exchange rates can have on a fairly small invoice.  If the invoice is much larger and the exchange rate goes in the other direction, money can be lost as well.
578029
There are spot exchange rates, what someone exchanges at the moment (these actually have little effect)\nThere are future exchange rates which is included in a contract my companies of different countries.  Such as British Company is selling an asset to American Company for 100,000 Pounds due in 30 days.  The equivalent price of the asset in dollars to the 100,000 pounds is the exchange rate.  These types of exchange rates typically make up the rate.\n\nThese two things make up the current exchange rate showing its intense variablity.\n\nTrying to make a model to determine exchange rates has led to many flaws using prices, real and nominal rates, and inflation in order to determine them.
397508
The others have provided links.  If you mean the actual currency, most banks will do it for you for bills.  I don't know of many places that will convert foreign coins, though.
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First, go here:\n\nhttp://finance.yahoo.com/currency\n\nOne US dollar is worth .7783 Euro. One Euro is worth 1.2848 dollars. To go from one direction to the other, just divide into 1. So to see how many dollars a Euro gets: 1/(.7783)=1.2848. And in the opposite direction: 1/(1.2848)= .783 Euro.\n\nFrom these currency values, you can see that a US dollar is worth less than one Euro, for otherwise they would trade 1-to-1.  Because currencies like the dollar and the Euro are not priced by the government (well they are in some ways, but typically currencies freely "float" on the free market) these values will reflect the demand for Euros versus dollars. (In some cases the central bank will intervene to change the price of the currency). \n\nThe Euro, since its inception in 1999, has tended to be "stronger" than the dollar. (i.e. you get more dollars per each Euro).  That strength might be cause by both real and perceived factors. Real factors might have to do with balance of payments (trade between Europe and the US) and perceived factors might have to do with people's perceptions about which currency is stronger in the long term.\n\nBecause our US dollar gets us fewer Euros, everything we buy from countries that use the Euro will be more expensive. But the opposite is true for Europeans: they can now buy more with a stronger Euro if they buy imported US goods.  This sets in motion some interesting politics: Exporters like a weaker dollar because Europeans will buy more US goods with their stronger Euro. But this also makes imported European goods more expensive, and that is a disadvantage for importers.\n\nIf I use my dollar and exchange it for Euros so that I buy European equities (stocks), and my dollar drops in value, I also get an economic benefit here. When I sell my European Euro-denominated stocks and convert from Euros to dollars, I will get back more dollars. \n\nMany people make money by following trends in currency prices, although to make money you have to buy and sell very large quantities of currencies- something that most people do not want to risk. Through something call price arbitrage, currencies will generally converge on one price regardless of how many are bought and sold. To illustrate an example:\n\nSay there are 3 currencies, A, B, C. A might be the dollar, B might be the Euro, and C might be the Yen.  If I use A and convert to B, and then take B and convert to C, and finally take C and convert back to A, I should get back approximately the same starting value of A I had.  The same goes regardless of which currency you start out with.  However, sometimes there are minute differences, meaning that when you get back to "A" you might end up having more (or less) than you started out with. The positive difference would be a small profit for you just for converting between currencies.\n\nThere are risks and costs, however. One cost is that every currency transaction has a price. Those who trade in currencies are in business to make money, and they will usually tax you for their services. If you have ever been to a foreign country you will notice that to buy a foreign currency you will have to pay more dollars than you get back when you want to convert the foreign currency into dollars. The difference is the profit that the currency trader makes. A second risk is that currency fluctuations happen fast and in order to make any profit you have to be very quick. You can lose a lot of money by day trading currencies.\n\nIn any case, that should give you a little background on currency exchange.\n\nPS: for 995 Euros: \n\n(995)x(1.2848)= $1,278 dollars.
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The market forces. In free market societies, interest rates, purchase parity of a basket of goods, and a premium for innovation and security would establish currencies values. Thus, the market establishes the rates.\nIn other societies, the government enters the market or simply fixes or freezes any transaction. Ex. China.
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Your bank will do it slowly\nA currency exchange will do it (at the airport)\nWestern Union will probably issue you an international money order
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I think that's because floating exchange rate system has an advantage that it can reflect supply and demand of market derectly to the exchange rate between currencies.  And you don't have to spend your foreign reserves.\n\nIn fixed rate sysytem, governments are required to use their foreign reserves to keep exchange rate at the fixed value.  But sometimes they used up all reserves and no longer are able to maintain fixed rate system.\n\nIn 1998, Thailand and Indonesia floated their currencies just because they exhausted all their reserves.
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This is a part of an article from those links below. I've found these links very reliable when i first came about doing forex, i think you'd feel the same way ;) There are more articles for beginners in the 'forex resources' ranging from intro to forex, forex concepts, tips on how to trade and the frauds that can be involved in forex.\n\nAre you researching the topic of Forex and the foreign exchange market for education? Or are you a trader who is looking for other markets to play around with? Well hopefully, we will give you an introduction to the Forex markets that will accommodate both your needs and inform you of the basic concepts and issues that intertwine with the world’s currency exchange market. Foreign exchange markets are always in a constant state of flux, and for the budding forex trader, it can be a rather daunting place to invest and trade your money, or for the student it is a rather confusing topic to master. We introduce you into the world of the foreign exchange market.
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I was in Europe not too long ago and by far, the cheapest way to go is use the ATM once you get there. You still pay the "foreign ATM fee" you would pay just like going to an ATM that is not a part of your bank at home (probably around $4.00) which is less than the usual transaction fee to exchange currency, and the best/most favorable exchange rates. This is partially because the bank does not have to keep a supply of the other country's currency.
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The foreign exchange (currency or forex) market exists wherever one currency is traded for another. It is the largest market in the world, in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. Retail traders (small investors or speculators) are a minute part of this market, may only participate indirectly through brokers or banks, and may be targets of forex scams.\n\nMarket size and liquidity\nThe foreign exchange markets is unique because of:\n\nits trading volume, \nthe extreme liquidity of the market, \nthe large number of, and variety of, traders in the market, \nits geographical dispersion, \nits long trading hours - 24 hours a day (except on weekends). \nthe variety of factors that affect exchange rates, \nAverage daily international foreign exchange trading volume was $1.9 trillion in April 2004 according to the BIS study Triennial Central Bank Survey 2004\n\n$600 billion spot \n$1,300 billion in derivatives, ie \n$200 billion in outright forwards \n$1,000 billion in forex swaps \n$100 billion in options. \nExchange-traded forex futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts, but constitute a very small part of the overall forex market.\n\nThe ten most active traders account for almost 73% of trading volume, according to The Wall Street Journal Europe, (2/9/06 p. 20). These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually only 1-3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203. Minimum trading size for most deals is usually $1,000,000.\n\nThese spreads do not apply to retail customers. To individuals, banks will routinely mark up the difference to say 1.2100 / 1.2300 for transfers, or say 1.2000 / 1.2400 for banknotes or travellers' cheques.\n\nTrading characteristics\nThere is no single unified foreign exchange market. Due to the over-the-counter (OTC) nature of currency markets, there are rather a number of interconnected marketplaces, where different currency instruments are traded. This implies that there is no such thing as a single dollar rate - but rather a number of different rates (prices), depending on what bank or market maker is trading. In practice the rates are often very close, otherwise they could be exploited by arbitrageurs\nThe main trading centers are in London, New York, and Tokyo, but banks throughout the world participate. As the Asian trading session ends, the European session begins, then the US session, and then the Asian begin in their turns. Traders can react to news when it breaks, rather than waiting for the market to open.\n\nThere is little or no 'inside information' in the foreign exchange markets. Exchange rate fluctuations are usually caused by actual monetary flows as well as by expectations of changes in monetary flows caused by changes in GDP growth, inflation, interest rates, budget and trade deficits or surpluses, and other macroeconomic conditions. Major news is released publicly, often on scheduled dates, so many people have access to the same news at the same time.\n\nCurrencies are traded against one another. Each pair of currencies thus constitutes an individual product and is traditionally noted XXX/YYY, where YYY is the ISO 4217 international three-letter code of the currency into which the price of one unit of XXX currency is expressed. For instance, EUR/USD is the price of the euro expressed in US dollars, as in 1 euro = 1.2045 dollar.\n\nOn the spot market
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Currencies are based on purchasing power, and interest rates in nations. If there are high interest rates that exsists in say the U.S. and low interest rates in Japan the exchange rates will move in the favor of the U.S.  If inflation is high in the U.S. compared to Kenya the U.S. dollar will fall to the shilling. To maintain equal purchasing or investing power between the two nations. This happens because in a free market world economy the prices of all similar goods and services will have very similar if not the same prices.
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You can get a general idea of the exchange from google.\nTry typeing "87 euros in dollars" in a google search bar.
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They usually trade on the exchange of the underlying security.  Most have a small market so prices can be spotty.
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You need to know the exchange rate to convert one form of currency in to another. \nTry this link : http://www.xe.com/ucc/
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Well, this can be a long answer, but the short of it is:  which way the rate goes with which currencies?\n\nExample:  you have a price set of 100 mexican pesos for an item and the exchange rate is 5 pesos per dollar.  So, you need US$20 to buy this item.  One month later, you are invoiced for 100 mex pesos.  You now go to pay this invoice 30 days after receiving it and the exchange rate is now 3 pesos per USD.  So, in order to buy those pesos to pay the bill, you must convert US$33 to pay the bill.  The peso strengthened against the dollar, so it costs you more to pay the bill in this example.\n\nHint:  Purchase as much as you can in USD.  It's a globally traded currency that is universally accepted.
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Importers, canadian travellers to foreign countries, people sending money to family in other parts of the world, etc- basically anybody who has any need to convert the cash to a foreign currency- they get more for every canadian dollar with the new rates
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If you want to make money by trading currency, you need to learn about it first. Its highly lucrative and equally risky.. You can get free information at -\n\nhttp://the-forex-trading.blogspot.com