Posted by forex at 8:53 AM
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1. Understand how currency rates are quoted. In general, an exchange rate can be calculated by looking at a currency pair. A currency pair is two different currencies and is the way in which exchange rates are quoted. The first currency in the pair is the transaction currency. The second currency in the pair is the payment currency. The quote tells you how many units of the payment currency are needed to buy one unit of the transaction currency.
2. Review the formula for calculating an exchange rate. The formula is Y-to-X exchange rate = 1 / X-to-Y exchange rate. Where Y and X are the different currencies being compared. For example, as the U.S. dollar is commonly used as a base currency, an Iceland krona (ISK) to USD exchange rate on October 2, 2009, equals .00802 krona divided by 1 Iceland krona. This tells us that one Iceland krona is worth .00802 USD, which is less than a penny.
3. Look up the exchange rate for the Iceland Kroner (ISK) with a currency converter. The currency converter will compute the rate of exchange between Iceland and most any currency in the world. As exchange rates are dependent on two different currency quotes and some currency is quoted differently than others, it is not possible to prescribe one way to calculate all currency prices.