Currency Converter Formula & How It Works
Converted Amount = Source Amount × Exchange Rate
- Exchange rate: price of one currency in terms of another
- Base currency: the currency you're converting FROM
- Quote currency: the currency you're converting TO
- Bid/Ask spread: buy price vs sell price (matters for large conversions)
Exchange rates fluctuate continuously based on supply and demand, interest rates, inflation, and economic/political events. The mid-market rate (midpoint between buy and sell prices) is used here. Banks and exchange services charge a spread (usually 1-4%) over the mid-market rate as profit. For large transfers, compare services like Wise or Remitly.