Conversion Rate

DEFINITION of 'Conversion Rate'

The ratio at which one currency can be exchanged for another. For example, a conversion rate for euros to dollars of 1.25 means that one euro can convert to 1.25 dollars. A high conversion rate between currencies means that one currency can "buy" more units of the other. If one euro can be converted into more than one U.S. dollar then the dollar has a lower value relative to the euro.


Also commonly referred to as the exchange rate.

BREAKING DOWN 'Conversion Rate'

The conversion rate depends on several factors, one of which is the interest rate set by the currency's issuing central bank compared to the interest rate set by the bank of the currency being converted into. Countries with high real interest rates typically attract investors from other countries and thus have an increased demand and higher value for their currency.

RELATED TERMS
  1. International Currency Converter

    An electronic program that allows for the quick conversion of ...
  2. Universal Currency Converter

    A program that allows for the quick conversion of currencies ...
  3. Market Conversion Price

    An investor's effective cost to purchase common stock when it ...
  4. Conversion Value

    The financial worth of the securities obtained by exchanging ...
  5. Conversion Price

    The price per share at which a convertible security, such as ...
  6. Conversion Premium

    The amount by which the price of a convertible security exceeds ...
Related Articles
  1. Trading

    How Do You Make Money Trading Money?

    Making money in the foreign exchange market is a speculative process. You are betting that the value of one currency will increase relative to another.
  2. ETFs & Mutual Funds

    Why Include Convertible Securities in Your Portfolio

    What are convertible securities and why you should include them in your portfolio.
  3. Investing

    Explaining Fixed Exchange Rates

    A government using a fixed exchange rate has linked the value of its currency to the value of another country’s currency, or the price of gold.
  4. Trading

    Interest Rate and Currency Value And Exchange Rate

    In general, higher interest rates in one country tend to increase the value of its currency.
  5. Trading

    How Are International Exchange Rates Set?

    International exchange rates show how much one unit of a currency can be exchanged for another currency.
  6. Managing Wealth

    Introduction To Convertible Preferred Shares

    These securities offer an answer for investors who want the profit potential of stocks but not the risk.
  7. Financial Advisor

    Worried About Stocks? Try on Convertibles

    Convertibles are a good hedge against equity market risk (if you're o.k. with losing a bit of upside potential).
  8. Markets

    Macroeconomics: Currency

    By Stephen Simpson For citizens of different countries to conduct trade, they have to buy and sell each other's currencies. The price of a nation's currency, expressed as an amount of a second ...
  9. Markets

    What Happens in a Currency Crisis?

    A currency crisis comes from a decline in the value of a country’s currency.
  10. Trading

    The Impact Of Currency Conversions

    Will a rising or falling dollar hurt you or your company? In this article we explore the impact of currency converisons on consumers, comanies, and countries.
RELATED FAQS
  1. What is a currency converter and how do I use one?

    A currency converter is a calculator that converts the value or quantity of one currency into the relative values or quantities ... Read Answer >>
  2. How do I find out my bank's bid-ask spread for currency conversions?

    Learn how to find your bank's bid-ask spreads for currency conversions, and understand why you should consider alternative ... Read Answer >>
  3. How do I convert dollars to pounds, euros to yen, or francs to dollars, etc.?

    Currency can be converted using an online currency exchange or it can be converted manually. To use either method, you must ... Read Answer >>
  4. Why do forex traders use a currency converter?

    All currencies are quoted in pairs - one country's currency against another country's currency. A currency converter is used ... Read Answer >>
  5. How do changes in national interest rates affect a currency's value and exchange ...

    Understand the role that changes in interest rates can play in determining the value and foreign exchange rate of a country's ... Read Answer >>
  6. What is a 'busted' convertible bond?

    Learn about busted convertible bonds; these are hybrid securities with conversion prices significantly higher than the market ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center