What is currency exchange?
When you buy something overseas, you’re dealing with currency exchange – swapping your rands for another currency.
Let’s say you’re flying to Europe. To spend in euros, you need to convert your rands at the current exchange rate (which tells you how much of one currency you’ll get for another).
Knowing how currency exchange works can help you avoid unnecessary costs, plan better and make the most of your money.
What affects exchange rates?
Exchange rates change all the time based on things like global demand, inflation and how stable a country’s economy is.
Here are some of the biggest drivers:
- Interest rates: Higher interest rates tend to attract foreign investors, increasing demand for that country’s currency, which can strengthen the exchange rate
- Inflation: When a country has low inflation, its currency typically holds more value compared to one with high inflation
- Economic stability: When a country has high growth and employment levels, its currency is often stronger
- Political stability: Uncertainty, such as elections, conflict or policy changes, can make investors cautious, weakening a country’s currency
- Market speculation: Currency values also respond to how investors expect a country’s economy to perform in the future
How to get the best exchange rates when travelling
You can’t control the exchange rate, but there are ways to manage your money when travelling or spending internationally:
- Know the cost of airport forex services: Airport forex services are convenient, but you often pay higher fees or get less favourable exchange rates. You can save by comparing exchange options in advance through your bank or travel service
- Watch out for currency conversion fees: Some banks charge extra when you use your card overseas. A credit card with zero currency conversion fees can help you save
- Keep an eye on the exchange rate: Even small shifts can make a difference in what you get for your rands. A quick check before travelling or making an international payment can help you decide when to convert or make a payment
- Be aware of dynamic currency conversion: If a card machine abroad offers to charge you in rands rather than the local currency, it may it costs more. Choose to pay in the local currency instead to avoid hidden fees
