# How do I calculate other currencies using domestic exchange rate chart?

I subscribed to an Australian currency daily update service, and every currency is against AUD. In this service, they show “AUD per unit” and “Units per AUD”. With this list, you can see how many AUD you need for one unit of that currency and how many units needed just for one AUD.

Now, if I want to calculate other currencies using this list… for example, I want to know how many units of Malaysia Ringgit will be needed for one Pound of UK? And how many units of US Dollar will be needed for one Singapore Dollar and otherwise? How do I calculate all these using the Australian currency update service?

How do I calculate these things using the list with the categories being “AUD per unit” and “Units per AUD” information?

E.g. of the service update…
Currency Unit: US Dollar
AUD per unit: 1.117
Units per AUD: 0.895

I heard there is a technique that can do that called Cross Rate but I don’t know how. Could someone please explain in detail how I can cross-rate. I hope to clear this up so the next time it’d be easier when I want to find out the value of other currencies by using the domestic exchange rates (e.g. AUD against all other currencies).

It would be great if someone could provide a [B]clear[/B] explanation. Ta.

First, you certainly can do these calculations. The math (or maths, as you Aussies say) is pretty simple.

But, second, why would you want to?

[B]First things first.[/B] The math is simple algebra: [a/b] x [b/c] = a/c

Substitute currency pairs for the fractions shown above, and you get, for instance, GBP/AUD x AUD/JPY = GBP/JPY

This is the [B]implied[/B] (or theoretical) value of the GBP/JPY, based on the value of the other two pairs. The actual value of the GBP/JPY will vary around this implied value, as the following calculation shows.

Here are Friday’s actual closing BID prices for the 3 currency pairs in this example (taken from FXCM’s Trading Station platform): GBP/AUD = 1.73449, AUD/JPY = 0.85535, and GBP/JPY = [B]1.48417[/B]. Now, let’s do the math:

GBP/AUD x AUD/JPY = GBP/JPY

1.73449 x 0.85535 = [B]1.4836[/B], which is not exactly the same as the actual market price

Here’s why. During market hours (Sunday afternoon to Friday afternoon, EST), all prices are LIVE, and small departures from the mathematical relationships can exist momentarily. They will be quickly corrected. (If they were not automatically corrected by subsequent price action, they would provide arbitrage opportunities for speculators, and that arbitrage would force the correction.)

[B]Now, to the second point.[/B] Live currency prices are readily available on the internet, for just about any currency pair you could want — so, why would you go through the process of calculating implied values, knowing that your calculations are likely off by a few pips?

If your broker’s platform doesn’t give you an adequate menu of currency prices, try this source: Currency Converter | OANDA

Using Oada’s Currency Converter, I find that [B]1 Malaysian ringgit = 0.1852 British pounds.
[/B]
Or, if you prefer, [B]1 British pound = 5.3867 Malaysian ringgits.[/B]

Here’s another calculator: Explore Google Search

Hope that helps.

Clint

Hmm, multiplication. I like your explanation. One of the guys in the other forum explained it just slightly different, and this is it below.

The answer is very simple just use Cross-Rate. For example, if you want to find cross rate for Singapore Dollar(SGD) per US Dollar (USD). Suppose the current rate of AUD-SGD is S\$1.25; while AUD-USD is A\$1.10; so we can use the formula: S\$1.25 x A\$1.10= S\$1.375.

Suppose you want to find number of units for US Dollar per SGD unit; so the formula will be: 1/1.25 x 1/1.1= USD 0.727.

It’s good to play with figures by using Cross-Rates. I have been dealing in Forex for a decade so it’s easy for me to calculate. Just practice

In his example, he multiplied it (e.g. S\$1.25 x A\$1.10= S\$1.375). To convert vice versa, he used the fraction (e.g. 1/1.25 x 1/1.1= USD 0.727). So for instance, if I were to calculate MYS/EURO and EURO/MYS (which is the vice versa pair of the early one), how should I calculate then?

This is the part where I got a bit confused with the calculations. I saw sometimes there’s multiplication and division.

to make it simple it is all mathematics.

1. Decide which exchange rate of currency you want to know. Say for example
[U]
MYR [/U] = MYR per British Pound
B Pound

based on formula
[U]MYR[/U] = MYR/AUD x AUD/B Pound (1)
B Pound

so when we do mathematics, the AUD would vanish as we cross multiply it.

You are given direct info of MYR/AUD right? so MYR/AUD = 2.991

Now we have to find AUD/B Pound. You are given B Pound/AUD

AUD/B Pound = 1 / (B Pound/AUD) = 1 / 0.6072

Substitute these in (1) *2.991 x (1/0.6072) = 4.9392

So 1 British Pound equal to RM 4.9292 which is not good for me to travel to London

Regards
FaRah FaRHaNa

After that you’ll get information like accountants give, 100% accurate but totally useless - seriously.

hurmm…meaning?