Why does the exchange rate vary?

Here is a list of some of the factors that influence exchange rates.

Supply and demand

If a large amount of currency is in circulation with low demand, the exchange rate is usually low. If, on the contrary, the currencies in circulation are reduced and demand is high, the exchange rate increases.

For example, when a French company pays its American supplier in dollars, it will sell its euros. Which will increase supply.

Conversely, during international events like the 2024 Olympics, many tourists from around the world will look to convert their currency into euros. Which will increase demand.

Consumer Confidence Index

When a country's population has confidence in the stability of its economy (low unemployment or inflation), consumer spending and investment tend to be higher. This makes the currency more attractive to investors, resulting in a higher exchange rate.

For example, when many companies invest in Europe, the value of the euro increases.

Trade balance

A country's trade balance looks at the value of exports relative to the value of imports. If the balance is not equal, the exchange rate is affected.

If exports are higher than imports, the country sends more of its foreign exchange abroad. Third countries then buy more euros, which has the effect of increasing demand. We will then notice a fluctuation in the exchange rate.

Inflation

Inflation is the increase in prices of goods and services over time in an economy.

This has an impact on the exchange rate when two countries have a different inflation rate. Indeed, the country where inflation is the highest will see the value of its currency depreciate.

For example, if the same good costs €100 in Europe, and 1,100 dirhams in Morocco, the exchange rate will be €1 = 11 dirhams. On the other hand, if with inflation, the same good costs €120 in Europe, and still 1100 dirhams in Morocco, the exchange rate will increase to €1 = 9.16 dirhams.

Conversely, when a country has a low and consistent inflation rate, its currency is generally more valuable, which can result in a higher exchange rate.

Interest rates

Interest is the fee banks charge consumers/businesses for borrowing money. These are directly linked to inflation. Indeed, if it is too high, interest rates increase. Which directly impacts the exchange rate.

Political unrest

Political upheaval creates uncertainty, which can discourage currency traders, reduce demand for the country's currency and decrease its value.

This is particularly what is happening with the war in Ukraine. This leads to uncertainty about the European situation. Result: the euro falls.

Country debt

If a country is in debt, its currency is considered a risky option by foreign investors. And for good reason, this leads to doubts about the solvency of the country. If investment decreases, the demand for money decreases. As a result, the value of the country's currency falls and the exchange rate falls.

How to get the best exchange rate?

A good exchange rate is as close as possible to the interbank rate. And for good reason, many foreign exchange services add a margin in order to generate profits from transactions. It is therefore appropriate to reduce these margins to benefit from a good exchange rate.

So where can you get the best exchange rate for sending money abroad? Several options are available to you:

1. Check the exchange rate on the internet: however, you have no guarantee of benefiting from this rate. The best option is to choose your transfer provider carefully.
2. Choose your money transfer provider carefully: to do this, we advise you to check the rates and fees applied. As such, avoid operators who lack transparency.
3. Compare deals: Making an international transfer with your bank or building society may seem like a simple option, but this service comes at a price. You can check with traditional banks, exchange offices or online services, such as WorldRemit, for different exchange rates.
4. Check the average market exchange rate: we explain exactly how to do this in the next paragraph.

How to calculate the real exchange rate?

Given the multiple variations of currencies, it is appropriate to use specific tools, such as the WorldRemit calculator, to know the exchange rate in real time.

To do this, simply indicate the amount (with the appropriate currency) that you wish to convert. Next, select the country for which you want to make the exchange. In a few seconds, the calculator tells you the exchange rate applicable at that moment.

Send money internationally with the best exchange rate

Online money transfer services tend to offer a faster and more cost-effective way to transfer money abroad.

With WorldRemit, you only pay a small commission and receive a fair exchange rate for money transfers. Indeed, all our costs are indicated from the start. Our calculator is here to help you with your transfers.

But be careful, due to exchange rate fluctuations, international transfers can cost you a lot of money. This is precisely why the WorldRemit app allows you to receive real-time exchange rate notifications. Receive current exchange rates daily for the currency of your choice wherever you are. You only need a few clicks to activate them.

Log in to the app and follow the following steps:

• Click “My Account” in the upper right corner
• Go to “Settings”
• “Notifications”
• Click “Add” next to “Exchange Rates”
• Choose the currency you want to receive notifications for. You can repeat this operation for the currencies of your choice.

Exchange rates: frequently asked questions

How do you know if the exchange rate is favorable?

It all depends on the sending country. If you want to send money with a high currency, the receiver will receive more if the rate increases. On the other hand, if you have a weaker currency, you will pay more.

How do you know if one currency is stronger than another?

To find out if a currency is stronger, simply use a currency converter, such as WorldRemit.