If your business conducts significant work with foreign locations, customers, or business partners, you’ll undoubtedly face the challenge of dealing with foreign exchange rates.
Exchange rate, or FX Rate, is the value of a nation’s currency in comparison to that of another. Free floating currencies tend to fluctuate daily based on a variety of factors, such as inflation, interest rates, the level of debt, along with supply and demand. As a result, products and services priced abroad are changing every day.
Since the exchange rate is directly linked to economic stability, the Central Banks of all the countries closely monitor the forex market. In recent years, and with the help of Information Technologies (IT), these institutions are playing a more active role than they used to, and now most of them have a daily publication of currency exchange rates in a variety of formats.
Official, reference & market exchange rates
Official Exchange rates are no longer what the name suggests, except for countries with strict foreign exchange controls where it could be mandatory for companies operating in their territories to comply with the currency data they provide. Central Banks from countries like Russia, Iceland and Moldova among others, clearly title their foreign exchange rates publications as “Official“, while at the same time advise that the rates are simply informative.
Along the same line, Central Banks like the European Central Bank, the Bank of England and more, publish what they call reference exchange rates, where the term “reference rate” is taken to mean an exchange rate that “is not intended to be used in any market transactions, whether directly or indirectly” as you may find in this Framework for the euro foreign exchange reference rates ECB document.
The problem is that while foreign exchange reference rates maybe are not intended for real economic operations, they are the one and only reference for everyone, making them a sort of official by de facto.
On the other hand, and because of the rise in e-commerce, we are living an explosion of private companies offering technological platforms to provide exchange rates, even in real time. While many of these companies claim to be the most reputed and authoritative – and some of them of course are – the economic sources and the calculations they process are unknown, so you must really trust the brand.
Which foreign exchange rates provider to choose?
As seen, this is not an easy question. Exchange rates will always be slightly different depending on every source. And although it may seem strange, there is nothing wrong with this. Different markets trade different currencies at different volumes, so they result in different rates.
But there are two key factors that can help to find your own solution for your business. One is your volume. How much you trade per day? If you trade millions, then every decimal counts and you will need to stick to the market as much as possible. Second is update frequency. Do you need to update the exchange rates of your site every minute? Every hour? Or is just every day fine?
Find your balance point
In the end things are simpler: if you don not trade millions per day, go for a simple solution. Average companies do not need real time updates. The cheapest plans of companies such as OANDA and alike are about $400 per month to $800 per year. And they may be selling you daily average mid rates like the ones you can find in Central Bank’s publications, plus some market commission.
How many of your products do you need to sell to make these bills profitable?
The important thing here is that the exchange rates you manage should be as close as the ones applied by your banking service to your international bills or payments you receive. Traditional Banks are usually the most expensive, but there are other platforms with cheaper and transparent fees. TransferWise is one of these well-known money transfer solutions.
Whenever possible, a good and simple approach to effectively manage the exchange rates you need, is to compare the rates plus fees from your trader with the rates published by a Central Bank of reference. If you could find this, preferably in the same country or area of interest, then it should not be difficult to deduce an approximate average difference and apply it to your calculations.
At TUDICOR Software we have taken the free source approach. Almost every Central Bank in the World publishes their daily foreign exchange, so the one you are looking for should exist, without having to pay a lot for having these rates ready in your computer.
We have developed the technology that makes unifying possible and make all sorts of exchange rates publications available to everyone, independently of the original format, being it html, txt, csv, xls, xml and json, including historical series.
foxer currency calculator is a professional solution. It has been designed as a light, efficient tool to assist all CPA accountants, product managers, travel agencies and companies that need to deal with foreign currencies in their daily work.
It also has been designed as a modular system, where every Central Bank has its own separate logic in the form of a plugin and can be easily updated.
With foxer currency calculator, there is no need for companies to struggle to find the right data sources for the foreign exchange rates they deal with. Depending on the market, they can just choose the Central Bank they find more convenient or trust the most, and the data gets directly from the origin to your computer or shared network folder. There are no hidden costs. No APIs to deal with.
foxer currency calculator also comes with Clipboard Integration & Advanced Table Conversion exclusive technologies, so you can easily convert complex tables with currency identifiers from different dates from within any document you could be working on, including Word, Excel, Mail or Internet Browsers.
Currency conversion has never been so easy. And look, at more than reasonable fees.