What is the exchange rate?
If you often go abroad, you may hear the term exchange rate. However, there are still many who still need to understand the term exchange rate. For those who don't know, an exchange rate is the value of one currency against another.
Apart from being an exchange rate for transactions, the exchange rate can also function as an investment instrument. Usually, investments are made by saving foreign currency whose value is stable and higher than the local currency, then selling it when the value of the foreign currency is high and selling it with local currency to make a profit.
Understanding Selling Rate
The selling rate is the exchange rate offered by banks, foreign exchange (forex) traders, or money changers. The selling rate is always higher than the buying rate because foreign exchange traders will take advantage of the difference in selling and buying rates.
The selling rate is used to transact in the destination country of origin. For example, when you want to travel abroad, like Japan.
Understanding Buying Rate
The buying rate is the exchange rate given by a bank, foreign exchange trader, or money changer to someone who wants to exchange foreign currency (managed floating rate). In other words, this rate is used to buy foreign currency using local currency. For example, when a foreign tourist wants to exchange his foreign currency for Rupiah in Indonesia, what is applied is that the foreign currency purchase rate uses Rupiah.
How to Calculate Selling Rates and Buying Rates
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How to calculate the selling rate
Example:
Customer A wants to exchange IDR 50 million for Singapore Dollars. The current selling rate for Singapore Dollars is IDR 10,000, while the current buying rate for 1 Singapore Dollar is IDR 9,000. So, the calculation of the Singapore Dollar money that Customer A will receive is the total money owned by Customer A divided by the selling rate for Singapore Dollars.
The total value of the original currency/selling rate of foreign currency
IDR 50,000,000/IDR 10,000
= 5,000 Singapore Dollars
So, Customer A will get 5,000 Singapore Dollars when exchanging Rupiah at a bank or money changer.
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How to calculate the buying rate
Example:
Customer B is on holiday in Malaysia and still has 5,000 Ringgit in cash. When he wants to return to Indonesia, Customer B will exchange the money at a money changer; the selling rate for 1 Ringgit at that time is IDR 2,500, and the buying rate is IDR 2,000. So, the calculation of the number of Rupiah that Customer B will receive is the amount of foreign currency owned by Customer B multiplied by the buying rate in Rupiah.
Total value of foreign currency X buying rate of foreign currency
= 5,000 Ringgit X Rp. 2,000
= Rp. 10,000,000
So, customers will get IDR 10 million when exchanging foreign currency at a bank or money changer.
To check the latest foreign currency selling and buying rates, visit the Bank MAS website at i www.bankmas.co.id. You can also use the currency calculator feature to find out the estimated amount of Rupiah or foreign currency you will receive.
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