Currency conversion rates—also called exchange rates—represent how much one country’s currency is worth compared to another’s. These rates fluctuate constantly due to supply and demand in the global foreign exchange (forex) market.
When demand for a country’s currency increases—perhaps because of strong economic performance, high interest rates, or investor confidence—its value rises compared to others. Conversely, if demand falls, its value drops.
Rates can be floating, changing freely with market forces, or fixed, where a government pegs its currency’s value to another (like the U.S. dollar). Banks, governments, and forex traders all influence exchange rates, and small differences between buying and selling prices (the “spread”) represent transaction costs.