What is Currency Conversion?
Currency conversion is the process of changing one country's money into another country's money using an exchange rate.
Exchange Rate:
The price of one currency in terms of another. Example: \(1 \text{ USD} = ₹83.50 \text{ INR}\)
Types of Exchange Rates:
| Type | Meaning |
|---|---|
| Direct Quote | Domestic currency per unit of foreign currency (₹ per $1) |
| Indirect Quote | Foreign currency per unit of domestic currency ($ per ₹1) |
| Buying Rate | Bank buys foreign currency from you |
| Selling Rate | Bank sells foreign currency to you (higher than buying rate) |
Common Currencies and Symbols:
| Country | Currency | Symbol |
|---|---|---|
| India | Indian Rupee | ₹ |
| USA | US Dollar | $ |
| United Kingdom | British Pound | £ |
| Europe | Euro | € |
| Japan | Japanese Yen | ¥ |
| China | Chinese Yuan | ¥ |
Currency Conversion Formula:
\[
\text{Amount in foreign currency} = \text{Amount in domestic currency} \times \text{Exchange rate}
\]
Factors Affecting Exchange Rates:
- Demand and supply of currencies
- Interest rates
- Inflation
- Economic stability
- Government policies