How exchange rates actually work
Why the rate on Calcxo, the rate at your bank, and the rate at the airport are all different — and which one you should care about.
5 min readReviewed Apr 1, 2026
Quick answer
An exchange rate is the price of one currency in terms of another. The 'reference' or 'mid-market' rate is the underlying price. Everyone you actually trade with adds a margin on top.
What sets the rate
Most major currencies float — their price is set by supply and demand on global markets that trade trillions of dollars a day. Interest rates, inflation, trade flows, and political news all push and pull the rate continuously.
Some currencies are pegged to another (often the US dollar) and don't move much day to day. A few are managed inside a band by the country's central bank.
Three rates you'll see
- Mid-market rate — the midpoint of what buyers and sellers are quoting right now. The 'true' rate.
- Bank or card rate — mid-market plus a margin (usually 1–4%).
- Airport / hotel rate — mid-market plus a much larger margin (often 5–15%).