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There are many web sites which provide the exchange rates between currencies. Where do they obtain this information? Is there any authoritative source from which they get this data? For example, Google also provides this feature. Where does Google get the real time data?

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The prices quoted are for currency pairs traded on the foreign exchange market. For currencies traded on these exchanges, the exchange rates of a given currency pair are determined by the market, so supply and demand, investor confidence, etc. all play a role.

EBS and Reuters are the two primary trading platforms in the foreign exchange market, and much of the data on exchange rates comes from them. Websites will usually get their data either from these sources directly or from a data provider that in turn gets it from EBS, Reuters, or another data source like Bloomberg or Haver Analytics. These data sources aren't free, however.

In the US, many contracts, transactions, etc. that involve exchange rates use the exchange rate data published by the Federal Reserve. You might see this in contracts that specify to use "the exchange rate published by the Federal Reserve at 12 pm (noon) on date --some date--". You can also look at the Federal Reserve Economic Data, which maintains data series of historical daily, weekly, and monthly exchange rates for major currency pairs. These data are free, although they aren't realtime. Data for each business day is mostly updated the next business day.

  • so foreign exchange markets will sell these currency pairs also... so the information is not free – Dungeon Hunter Jun 25 '13 at 11:08
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    @Sunny No, companies like EBS and Reuters sell this data; it isn't free. However, many websites will show the current exchange rate, possibly with a small delay, free of charge (Google, for example, as you mentioned in your question). – John Bensin Jun 25 '13 at 11:10
  • People should also be aware that there is no equivalent to a NBBO in FX unlike in equities, so using random broker X for price discovery does not guarantee the reference market rate on EBS or Reuters is the same. It's probably within a reasonable percentage with near to the same mid, but is likely to have a much wider spread. This means the rate you see on a website like Google will not actually be achievable if you wanted to trade yourself (not to mention latency) or go down to your local FX exchange on the corner. My theory is this is why google quotes in fewer DPs than convention. – davmp Jun 30 '16 at 0:23

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