xe.com is a great website to check currency exchange rates, but what does it really mean?
Xe.com is a website that shows everyone the exchange rate of just about any currency in the world. The exchange rates that are displayed are live exchange rates. This means that they change constantly while the foreign exchange market is open (24hrs a day, about 6 days a week). The exchange rates quoted are mid-market rates.
What are mid-market exchange rates?
The mid-market rate is the exchange rate that sits exactly in the middle of the buy and sell exchange rates. So if the exchange rate to buy a currency is 0.6990 and the rate to sell the same currency is 0.7010 then the mid-market rate is 0.7000 (exactly in the middle of the two rates)
Interbank exchange rates and the wholesale market
Xe.com displays mid-market exchange rates from the interbank (or wholesale) market. The interbank market as the name suggests, is the market in which banks trade between each other. It's known as the wholesale market because larger ‘wholesale' amounts are traded. Most trades are for more than 1 million U.S. dollars. Banks trade on the wholesale market to try and make a profit from trading or they use the currency to sell in smaller amounts to their customers.
Why you'll never get the exchange rate on Xe.com
The exchange rate displayed on xe.com is a mid-market rate from the interbank market. This means that unless you are trading on behalf of a bank and are buying or selling a wholesale amount (above 1 million U.S. dollars), you are unlikely to be able to transact at this displayed rate.
Xe.com is a very useful tool to work out how good your exchange rate is. The interbank exchange rate on xe.com is effectively the cost of your bank or currency provider to buy or sell that currency. It's their wholesale cost. The rate you receive will be the wholesale rate plus a margin they take to cover their expenses and make a profit.
Imagine you see a couch for $900. What if you could check your mobile to find out that the store bought it from the factory for just $500. Then you know that the store is making $400 and perhaps you can negotiate a better deal.
Ok, now imagine you are buying some U.S dollars for a holiday. Xe.com is shows an exchange rate of 0.7000 but the currency exchange is offering you 0.6600 . The difference between what you see on xe.com and the rate you receive is how much money they will make on the transaction. Now you are in a better position to compare other exchange rates or ask for a better rate.
Can you exchange currency through Xe.com?
International Money Transfers using Xe.com
Xe.com offers a service to send money overseas but is it really xe.com that will send your money?
If you choose to use xe.com to transfer money overseas, it's actually being done by Western Union. That's because Xe use a company called Custom House Currency Exchange to make all their payments. Custom House was bought by Western Union in 2009.
This is likely to change though. In 2015, Xe.com was bought by Euronet which competes with Western Union. At a guess, the International Money Transfer service offered by xe.com will be run through one of the money transfer companies owned by Euronet like HiFX or Ria Money Transfer
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Should you use Xe.com?
Xe is a great tool to check exchange rates. While the website could be cleaner, it does provide accurate exchange rates in a broad range of countries. As mentioned, it is a great tool to check the wholesale exchange rate. This wholesale rate is an ideal rate to compare against the exchange rate you are being offered by your bank or currency provider.
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