A:

A currency converter is a calculator that converts the value or quantity of one currency into the relative values or quantities of other currencies. For example, if you had $1 that needed to be exchanged into the local currency of a country you are visiting, you would need to know the dollar-euro conversion, if you were traveling to certain parts of Europe, the dollar-pound conversion if you were in traveling in the United Kingdom, the dollar-yen conversion if you were traveling in Japan, the Canadian dollar-U.S. dollar conversion if you were traveling in Canada or the Swiss francs-dollar conversion if you were traveling in Switzerland. A currency converter stores the most recent market valuations of the world's currencies, which allows individuals to compare the value of one currency against those of others in the database. The values of the different currencies are determined based on the supply or demand of dealing prices between international banks.

Currency conversions also can be determined by contacting a local bank and asking for exchange rates. However, the rates that are quoted to retail customers at a bank may differ slightly from those at which banks trade among themselves because banks make a small profit on the exchange rate each time they buy or sell a currency. The rates shown on online rate converter tools usually do not take this retail profit into account.

To find the value of any country's currency and compare it to the currencies of other countries, online resources such as the Yahoo! Finance Currency Converter can be helpful. In addition, charts showing currency prices over various periods of time are available, which will help you gain perspective on the value of a specific currency over time.

(For more on this topic, see A Primer on the Forex Market.)

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