If you work, travel or shop between the United States and Europe, it’s important to understand the difference in value between U.S. dollars (USD) and European Euros. You can’t exactly memorize the currency exchange rate like you can memorize differences between the metric and the imperial systems, even when you know plenty about how exchange rates work.
The USD to Euro currency exchange rate is based on a variety of market factors, which means it can (and does) shift daily. That’s a lot to keep up with, especially when you’re managing investments. So, rather than learning exact numbers, it’s helpful to understand how to calculate the currency exchange rate and where to find reliable, up-to-date information about current values. We’ll show you how.
Comparing the value of an item in dollars, one form of currency, to Euros, another form of currency, is like comparing apples to oranges. Although there are concrete financial measurements that determine the value of each currency, the relative value of a dollar vs. the relative value of a Euro can be hard to compare. That’s because they’re completely different types of currency.
An exchange rate helps to measure the two currencies on an even scale. The dollar to Euro exchange rate tells the number of dollars it takes to equal up to one Euro. The Euro to dollar exchange rate works in reverse, explaining how many Euros it takes to equal up to a single dollar.
It’s important to understand the current exchange rate if you’re traveling between a country that uses Euros and one that uses dollars. This can help you budget for your trip. The same applies if you run a business with customers and vendors in the United States and Europe. You need an in-depth understanding of the current value of each currency to operate. If you’re calculating a USD to Euro budget, remember that the exchange rate between these two currencies changes daily.
What Makes the USD to Euro Conversion Rate Change?
The exchange rate between dollars and Euros is based on the current values of both currencies, which fluctuate regularly. Euros and dollars are fiat currencies, meaning their value is based on intangible economic factors rather than tangible items of value, such as gold or silver.
The Federal Reserve is the central body that distributes dollars, and the European Central Bank is the agency that distributes Euros. However, neither of these government-backed organizations set the value of their respective currencies. Instead, the values depend on the overall health of the economies that circulate each currency.
In general, a stable economy means a higher currency value. On the other hand, economic volatility can decrease the value of a currency. When there are high unemployment rates, high inflation and high levels of national (or international, in the case of Euros) debt, the currency’s value decreases. But when there are high rates of job creation, healthy international trade and lower levels of national (or international) debt, the economy’s health leads to an increase in the value of the currency.
Gross domestic product (GDP) is another important economic measure that helps determine a currency’s value. This is a measure of the economic activity in a geographic area. It reflects the amount of goods and services being sold within a country or region. This is a good predictor of the number of people who are employed and actively spending money within an economy.
How to Make a USD to Euro Conversion Equation
When you’re calculating a currency exchange, you multiply to convert one currency to another, and you divide to convert the target currency back to the original currency.
Suppose Sandra in the U.S. needs to buy a car part directly from a German factory. Her business credit card allows her to make purchases in Euros, but she needs to understand how much the part costs in dollars.
Suppose the part costs €500. If the Euro to dollar exchange rate is 1.75, meaning one Euro is equal to 1.75 U.S. dollars, then Sandra can calculate the cost in dollars by multiplying 500 by 1.75. The result is 800, so €500 is equal to $800. Sandra can expect to be charged $800 on her credit card statement if she makes the purchase.
Later, Sandra notices that she’s received a refund from the company on her credit card statement. They charged her the wrong service fee, and she got $25 back. She wants to make sure she received the right amount in Euros. The Euro to dollar exchange rate is still 1.75.
To convert dollars to Euros, she can divide the dollar amount by 1.75. So, $25 divided by 1.75 is €14.29. Sandra can confirm that she received the correct refund amount of a €14.29 service fee that didn’t apply to her order.
Best USD to Euro Conversion Calculators and Charts
Many websites make converting dollars to Euros or Euros to dollars much easier than doing a conversion equation. Instead, you can put in an amount for one currency, and the website calculates the equivalent value in the other type of currency. Before using the conversion on a website to make major financial decisions, do a little research into how the website determines its exchange rate. Only rely on a calculator that updates daily based on a reliable source.
You can also use conversion charts. These line graphs display historical information. One axis measures time over a set duration, such as years, months or financial quarters. The other axis displays the exchange rate at that point in history. While a conversion chart gives insight into past exchange rate trends, it may not be the best method of planning when it comes to current currency exchanges.
XE is one website that’s trusted as a reputable currency conversion calculator. Most financial institutions that offer currency exchange also have calculators on their websites that they update daily. If you plan to do a currency exchange using a certain financial institution, that company’s tool may be the most reliable because it’ll likely have an option to include the company’s added fees in the calculation.
Converting Euros to dollars (or vice versa) is a simple multiplication equation. The hardest part is ensuring you have an accurate exchange rate. You’ll also have to remember that market fluctuations may change the exchange rate between the time you research a financial decision and the time you carry it out. But, with the right tools, you can be relatively certain of the amount you’ll pay.