An exchange rate is a rate at which a country’s currency is exchanged for another country’s currency. Different nations have different currencies, and their values in the international market are affected by economic conditions, supply-demand of money, and other factors.
The US dollar (USD) is one of the world’s most powerful currencies. When it comes to exchange rates, we usually compare a currency with the USD. Besides this, the British pound and euro are also among the world’s biggest currencies. However, they are not the strongest in the world. Instead, they are only the most popular and most traded ones.
The world’s strongest currencies include the Kuwaiti Dinar, Bahraini Dinar, Omani Rial, Omani Rial, and Jordanian Dinar.
In Nepal, we usually compare the Nepali rupee to the USD when considering exchange rates. The currency also has a fixed exchange rate with the Indian rupee (INR).
Today, we often use Google to check exchange rates. It’s much easier to calculate the exchange rate of any currency using Google. But does it provide the best exchange rate value?
In this article, we will explore exchange rates, their types, mid-market rate, FEDAN, and the best rate provided by Thamel Remit to transfer money from the USA to Nepal.
What is an Exchange Rate?
As we have discussed, an exchange rate is a rate at which one currency is exchanged for another. The value of this rate affects trade and the movement of money between nations.
In general, there are two types of exchange rates:
- Floating
- Fixed (or pegged)
Floating exchange rates change with the supply and demand of currencies in the international market. This exchange rate is never the same; it keeps altering as transactions occur. The exchange rate of the US dollar to the Nepali rupee is an example of a floating exchange rate.
Fixed exchange rates are when the exchange value of a country’s currency is always the same as another’s. Fixed rates are also known as pegged exchange rates. The exchange rate of the Indian rupee with the Nepali rupee is an example of a fixed exchange rate (1 INR = 1.60 NPR).
Various factors like economic activities, market interest rates, GDP (gross domestic product), and unemployment rates of each country determine the exchange rates in the market. The value is set in the global marketplace. Banks and other financial institutions trade currencies that also affect the value in the market.
Exchange rates have a buy and sell rate. A sell rate is a value at which someone sells foreign currency in exchange for domestic money. For example, an Australian tourist visits Nepal, so he wants to sell Australian dollars and buy Nepali rupees. That rate is a sell rate.
Similarly, when leaving Nepal, the tourist wants to buy Australian dollars in exchange for the Nepali rupees he has. That rate is a buy rate.
The change in exchange rates affects businesses because of the difference in the cost of supplies and demands of purchase from different countries.
Mid-market rate
A mid-market rate refers to the exchange rate of a currency that is halfway between the buying and selling price of that currency in the foreign exchange market. This rate is considered the fairest exchange rate because it represents the actual value of a currency.
It is also a benchmark for calculating the value of a currency, especially in cross-border transactions. It differs from the retail exchange rate offered by banks and currency exchange providers, including a markup to account for their profit margins.
Mid-market rate is the real exchange rate for trading foreign exchange in the free market. However, it also fluctuates with changes in foreign exchange supply and demand conditions.
FEDAN
FEDAN (or Foreign Exchange and Money Dealers Association of Nepal) is an organization established for dealing in foreign exchange in Nepal. It is a self-regulatory body established on January 4, 1996.
Its primary role is to provide rules governing the conduct of interbank foreign exchange business. It works with the Nepal Rastra Bank (NRB) to reform and develop the foreign exchange market.
The primary objectives and goals of FEDAN are:
- To promote and develop inter-bank market and money market transactions in foreign exchange.
- Coordinate and interact with central banks, financial institutions, and governmental bodies concerning banking activities relating to foreign exchange and the money market.
- To provide information about issues related to inter-bank foreign exchange and the money market to the general public.
- To play the role of an arbitrator to settle problems if any divergence is created among the member banks of this association concerning money transactions.
- To maintain synchronization with national and international legal organizations and groups involved in activities identical and compatible with its goal, objective, and procedures.
FEDAN is an official governing body that provides its own exchange rate that varies from the market rate.
Providing the Best Exchange Rate for New Users
Thamel Remit provides instant digital money transfer services from the United States to Nepal. It’s frustrating to wait minutes to receive your money, especially in this digital age. Our system enables members to send money from the USA to Nepal within a few seconds. We provide instant settlement in non-card-based, bank-to-bank transfers.
Furthermore, Thamel Remit provides the best exchange rate for new users with zero fees on their first transaction. We also provide the best rate for the first three transactions.
While most remittance services provide market exchange rates, we give the FEDAN rate for money transfers.
Currently, we have a limit of $500 per transfer. But this limit for instant money transfers will increase as you continue to send money using our platform.
Thamel Remit is the best platform for digital money transfers between the US and Nepal. We are connected to US and Nepal real-time payment networks. Plus, we are a member of the Nepal Clearing House (NCHL). So not only are we the fastest, most convenient way to send money, but we are also the most reliable, providing you with the best exchange rate.
FAQs
What is an exchange rate?
An exchange rate is the value of a country’s currency when exchanged with another country’s currency. Exchange rates are either floating or fixed. The supply and demand of currencies identify floating rates. An agreed-upon standard rate between two currencies forms fixed rates.
What is the mid-market exchange rate?
The mid-market rate is an exchange rate at the midpoint between the buy and sell prices of two currencies. This is also constantly changing with the change in demand and supply of the currencies. The mid-market rate is also considered a fair (or real) rate.
What is the FEDAN rate?
FEDAN (Foreign Exchange and Money Dealers Association of Nepal) is an official foreign exchange governing body that works with banks and financial institutions of Nepal. FEDAN rate is the exchange rate — which is usually different from the mid-market rate — set by FEDAN.
How to send money from the USA to Nepal?
Thamel Remit provides the fastest digital money transfer service from the USA to Nepal. To send money, you must create an account with Thamel Remit, which takes less than a minute. Then, you can transfer money to your friends and family in Nepal without delay. Thamel Remit also offers zero fees in first transactions and provides the best exchange rate (FEDAN rate).
Biliz is a writer, creator, and entrepreneur. He writes about self-improvement and online writing. If you want to get inspired and learn more from him, subscribe to his newsletter. Also, check out his writing on Medium. See all his links here.