Exchange rates explained: 4 factors contributing to fluctuation
With advancements in technology, transferring money internationally has never been easier. Consumers now have the option to use digital money transfer apps like Paysend to send money – right from the palm of their hands – or they can still rely on traditional transfer methods like a bank or remittance outlet for high-touch service.
Despite having more control than ever for sending money abroad, one factor can play a big role in how much you may spend or save when you transfer funds – exchange rates.
What are exchange rates and how does it affect the money I send internationally?
An exchange rate is the difference in value between two currencies. So, in terms of transferring money, if you were to send 100 US dollars to another country, your recipient may receive more or less money depending on how the US dollar is valued to the currency in the other country.
Rates can change frequently. If you transfer money one week with a low exchange rate, that rate may change the next week as currency valuations are constantly fluctuating dependent on a country’s economic health.
4 factors that contribute to exchange rate fluctuation
While exchange rates can fluctuate on a daily basis, the change is often minimal and in small increments. However, they are some factors that may contribute to a larger jump in rates such as:
- Inflation – the rise in value of a country’s economy. If inflation is lower in one country than another, consumers may be able to buy more goods while spending less money.
- Interest rates – the percentage that a lender charges a borrower. High interest rates are often associated with an increased currency value.
- Strong economies – value of a country’s currency is dependent on economic standing. If people see an increase in a country’s economic standing, the demand for its currency may rise and vice versa if there is a perceived decline.
- Trade terms – ratio comparing prices for both imports and exports. Depending on the price of a country’s exported goods and the rate in which it imports, exchange rates may fluctuate based on demand.
Paysend offers competitive transfer fees
Here at Paysend, we want you to get the best rate possible when transferring money to loved ones living internationally. That’s why we charge a flat fee of just $2 through our platform. In addition to our low, fixed fee, we also offer competitive exchange rates to help ensure you and your recipient get the most out of your transfer.
Want to know just how much your recipient will receive when you transfer money with Paysend? Check out our home page for our Exchange Calculator.