3

As an example, this page gives the following rates:

AUD/USD:

Bank buys (I want to receive/sell) - 0.882

Bank sells (I want to send/buy) - 0.7448

Does this mean that if I want to convert my AUD into USD, the bank will give me $0.7448 USD for every $1 AUD I give them?

And If I want to convert USD to AUD, they will give me $0.882 for every USD I give them?

5

The rates are always one way round - in this case they are saying that 1 AUD is worth 0.882 or 0.7448 USD.

You can check the general scale with plenty of other websites which are more explicit about what they mean, e.g. Google for "1 AUD in USD" and it currently says "1 AUD equals 0.79 USD".

The differences in the rates you've been quoted are because the bank wants to make a profit. If you want to convert your 1 AUD to USD, you pay the worse rate and will get 0.7448 USD. If you want to convert back, you need 0.882 USD to get 1 AUD.

When you see just one rate from somewhere like Google it is a "mid-market" rate. It's not a rate that you could either buy or sell at, but in some sense it's a measure of what the "real" rate is.

  • "People trading a very large amount of currency at once will typically be able to get buy and sell rates that are much closer to the mid" what? Actually large orders usually have the problem of getting a worse rate, since they are moving as they are buying (or selling)… – o0'. May 3 '15 at 13:45
  • 2
    Fair enough - I really meant amounts that were larger than just changing holiday money but not big enough to move the market. Anyway, it doesn't really add to the answer much so I just deleted it. – Ganesh Sittampalam May 3 '15 at 13:49
  • @piman314 Is this bank really charging a spread of one thousand three hundred and seventy two pips?! That seems outrageous, I've typically seen banks charge a spread of under 10 pips. – Michael May 3 '15 at 14:55
  • Most retail FX providers charge large spreads. – Ganesh Sittampalam May 3 '15 at 15:12
  • @Lohoris You're right in theory, the consolidated rate might have a larger spread, but in practice currencies are traded in lots, a lot is USD100k or, in this case, AUD 100k. Anything that's not a multiple of a lot has to be traded as odd lot which implies an odd lot surcharge which can be quite hefty. – hroptatyr May 5 '15 at 4:51
3

It's simple:

enter image description here

While the single rate shown is $AUD = $0.79USD, think of the rates you have as a bid/ask. The bank will pay (bid) $0.7448, but sell (ask) at $0.882.

protected by Chris W. Rea May 29 '15 at 13:22

Thank you for your interest in this question. Because it has attracted low-quality or spam answers that had to be removed, posting an answer now requires 10 reputation on this site (the association bonus does not count).

Would you like to answer one of these unanswered questions instead?

Not the answer you're looking for? Browse other questions tagged or ask your own question.