What is a Conversion Rate?

Conversion Rate Definition. A Conversion Rate is another term that is often used for foreign exchange rate, exchange rate or forex rate. The conversion rate, however, can also pertain specifically to the consumer retail market environment. In those instances, it is stated as a single figure, not a Bid/Ask quote, since consumers often use it to convert currency when they travel from one country to another. These simplified figures may appear in newspapers or on bank windows and only reflect retail over the counter prices on the Ask side of the equation. There are a wide variety of factors that may influence a bank’s retail exchange rate, such as interest rates, inflation, inventory, internal costs, volatility and the state of politics and the economy in each country. Rates tend to be set daily by the Treasury Department of the bank for branch use during the day.
