History
The first coins date back to the seventh century B.C., where they were first produced in Turkey. Some scholars also trace coin development to India and China. All three places seemed to have developed a coin at the same time (see Resources below). In order for currency exchange to work, one needs to have two different systems of exchange based on some sort of common denominator (money) instead of barter. This common denominator was first expressed in the forms of coins, which acted as a third party in the exchange of goods.
Features
Today, currency exchange exists between scores of modern nations, each one printing its paper money and manufacturing coins. Rates are established between two countries when both countries agree to a relative value for each measure of currency. Sometimes the currency of a smaller country is linked directly to another larger country. This is true in Central America, where both the Belizean dollar and the Guatemalan Quetzal are always set at the same value as the American dollar.
Function
Currency exchange rates are calculated on a daily basis in a way similar to the stock market. Even though rates may change on a day-to-day basis, it takes many small changes all going in the same direction to make any noticeable difference. These changes take place over a course of years and over time rates can change a lot. For example, today the United States dollar and the Canadian dollar are virtually equal, but as recently as 5 years ago, a Canadian dollar could only buy about 70 American cents.
Expert Insight
The ATM machine has greatly changed the world of currency exchange. Now instead of searching for the best exchange rate, a foreign visitor can simply go to the nearest bank machine and withdraw money from their own bank back at home. The machines will automatically dispense the amount of money that you request at the current going rate of exchange. The rate is applied equally to both small and large amounts of money. The only variable is that sometimes a service fee is added on to the transaction.
Effects
One can still exchange money at foreign banks, tourist agencies, hotels, with merchants and even on the black market, but the colorful days of foreign money exchange are definitely changing. With electronic banking, it is no longer so necessary to carry large amounts of home currency on your foreign voyage. This can all be done at the local ATM machine and with a lot more consistency and safety.
Tags: