What is an exchange rate?

By timing it right, you save on trips abroad, imported goods, and international money transfers.

An exchange rate shows you how much of one country's currency you could buy for each unit of another currency. It's expressed as a pair of currencies. 

For example, if you're converting Australian dollars (AUD) to US dollars (USD) and the AUD/USD rate is 0.64, you'll get 0.64 USD for each 1 AUD you exchange. This is assuming you get the market rate and excludes any fees.

It works the same way in reverse. The USD/AUD rate might be 1.56, meaning you'd get 1.56 AUD for each 1 USD you exchange.

Knowing the exchange rates and fees can help you make better choices and save money when exchanging currencies or sending money to other countries.

The rate affects the amount you get when you exchange currency.

A rising currency can be a sign of a country or region's economic health. But exchange rates go up and down. Here are 4 things that can affect exchange rates:

Some inflation is good for an economy – it shows there's an increasing demand. But too much inflation can be a problem, as goods and services become less affordable.

Central banks consider this balance when setting official interest rates. If inflation is rising too fast, they may increase interest rates. This can make it more expensive to borrow and more rewarding to save, which reduces demand and slows inflation. 

Higher interest rates can increase a currency's value by attracting foreign investment. This means more money coming into a country or region and higher demand for the currency.

But if inflation is below its target level, a central bank may look to reduce its interest rates. Lowering rates makes it cheaper to borrow and less rewarding to save, which encourages people to spend. The increase in demand can push inflation higher. In Australia, interest rates are determined by the Reserve Bank of Australia.

A country or region's trading relationship with the rest of the world can also affect its currency. If it exports more than it imports, it's known as a trade surplus. It will typically have a stronger currency than those with trade deficits. When demand for Australian exports go up, demand for Australian dollars will also go up. This is because goods and services will be bought with Australian dollars. 

Traders' expectations play a big part in exchange rates. These include the factors outlined above, as well as:

You can check the latest HSBC exchange rates and make the most of currency movements by converting at competitive rates.

These rates are updated every 3 to 5 seconds, but they are indicative only and can change with market conditions. For larger transactions, please use the Exchange Calculator to check the indicative exchange rate.

There is no HSBC transfer fee if you:

Other banking services fees and charges may apply, including correspondent bank fees for international transfers. Fees may change, so make sure to check the applicable fee in our Personal Banking Booklet (PDF) when making a foreign currency transfer.

Exchange rates are important for Australia's economy because they affect how it trades and manages money with other countries. 

A weaker Australian dollar can attract more foreign tourists as they’ll pay less in their currency. But if the Australian dollar strengthens, exports become more expensive for foreign buyers, and sales could drop. Australians then pay less to buy foreign currency.

Little charges, like cash withdrawals and currency exchange transaction fees, can really add up. Save some cash when going overseas with these 7 foreign exchange tips.

Read more: How to avoid international transaction fees

A multicurrency account lets you hold multiple currencies in one account. This is useful for those with international needs as well as those who travel frequently.

With the award-winning HSBC Everyday Global Account, you can buy, hold, and spend in up to 10 currencies, and spend anywhere Visa is accepted using one Visa Debit Card.

You can also: