Trying to Understand Currency Exchange Rates

When people and other sources refer to a currency exchange rate, what are they referring to, is it the bid price or the asking price? Lets say that I go to google and I type in USD CAD exchange rate and it gives me 1.32; what does this price represent the ask price or the bid price?

Generally, when you ask for a currency exchange rate (a price) from any source — Google, a bank, a currency exchange kiosk at the airport, etc. — you will be given that entity’s ASK price.

Generally, they assume that you are BUYING. And most people who rely on such entities for currency prices assume that the price they are quoted is “the price”.

But, you know what they say about “assuming”.

There is no such thing as “the price” in foreign exchange. The airport kiosk’s “price” won’t match your bank’s “price”. And neither of those “prices” will match your forex broker’s ASK price.

Furthermore, if you compare ASK prices simultaneously from 10 different forex brokers, you will likely see at least 5 different “prices”.

To repeat, there is no such thing as “the price” of a currency pair.

Between the interbank network at the top of the forex food chain, and you at the bottom of the forex food chain, there are several “market makers”, each adjusting “the price” they receive from upstream, before quoting a “price” of their own downstream. By the time a “price” gets to you, it’s been worked, and re-worked, and re-worked again.

Who knows what Google is quoting. Ask them.

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Thank you very much for your answer. This definitely cleared things up.

i think you already got the answer with great detail you need. thanks Clint for your nice summary