How do foreign exchange rates work?


What factors cause them to change? And why do you get a different exchange rate depending on where (both in the same country and in a different country) you buy your currency?

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Based on what dealer you’re going through and their profit margin, inflation in the countries, availability and demand for that currency, and whether the primary markets are open (meaning more places to buy) or if only the secondary markets are open

It works like any other market. If I want to buy Canadian dollars I have to find someone who wants to trade them for American dollars and we have to agree on a price.

Changes are most often driven by demand. If Canada develops the hot new product everyone in the world wants people will be clamoring for Canadian dollars to pay for them, appreciating the Canadian dollar.

Exchange rates can be different in different places because it may be harder to find the relevant buyers/sellers in some places. It’s easier to find someone looking to sell Canadian dollars in New York than Mongolia.