How to calculate exchange rates
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When trying to calculate exchange rates, there is more than a simple ratio to take into account.
Basic maths says that if EUR/USD ratio is, lets say 1.15, and you want to know how many EUR you will get from 100 USD, then you just should divide 100/1.15 and obtain 86.96€. In the opposite, to get 100 EUR converted to USD you need to multiply 100 * 1.15, which equals to 115$. An easy way to remember this is to multiply across left-to-right and divide across right-to-left.
But from foxer currency calculator’s perspective, things are slightly different and more complex.
Widening the maths
At TUDICOR we consider every spot exchange rates publication as a universe in itself. It contains the major currencies known by the institution and provides the exact values against the base currency at a certain date. The Base currency is the currency managed by the Central Bank of the country. It is the key and the pillar to all possible conversions available in the context and can’t be defined by itself, but for comparison to the provided values. No other currency values can be inferred out of this report.
But there is one important exception to this: pegged currencies.
Oppositely to free floating currencies, and as explained previously in this article, pegged currencies do have a fixed ratio against some other country currency. The Dirham of the United Arab Emirates (AED), for example, is linked at 3.6725 per USD, acting in this case, the USD as a bridge for the calculation.
And this is important because it means that, in a general way, if any bridge currency is present in a spot exchange rates report, all those currencies that are linked to it are convertible too.
For instance, the Swiss National Bank publication contains just 4 currencies: USD, EUR, GBP & JPY. But the USD have 15 country currencies pegged to it, the GBP 2 and the Euro 22 ( including the historical ones ), so, at the end, the currencies available for the SNB publication are more than 40.
