Whether it’s for conducting cross-border business, managing personal finances during travel, or analyzing global economic trends, an understanding of international currencies is essential for making sound financial decisions and thriving in an interconnected global economy.
If you are a globetrotter seeking new adventures, a savvy investor navigating the global market, or simply an inquisitive mind fascinated by the intricacies of the financial systems, this guide will provide you with a comprehensive overview of international currencies, their characteristics, and the current state of the top international currencies.
Central to our exploration of international currencies is the concept of exchange rates. We will also delve into how exchange rates work and the factors influencing them.
Let’s unravel the mysteries of international currencies, connecting us all through the language of money.
A currency is a form of money used in a specific country or region as a medium of exchange for goods, services, and investments. Each currency is represented by a unique code, which helps distinguish it from other currencies. For instance, the United States dollar is denoted as USD, the euro as EUR, and the British pound as GBP.
International currencies are monetary units that are widely accepted and used for transactions across national borders. They serve as a medium of exchange, facilitating trade, investment, and financial transactions between countries.
These currencies are typically issued and regulated by sovereign nations or groups of countries and they are accepted beyond their country of origin due to factors such as economic stability, geopolitical influence, and international trade relationships.
Major international currencies, often referred to as reserve currencies, such as the US Dollar and the Euro are held in substantial quantities by central banks around the world to support international transactions and maintain financial stability. Other major international currencies include the British pound (GBP), Japanese yen (JPY), Swiss franc (CHF), Canadian dollar (CAD), Australian dollar (AUD), and New Zealand dollar (NZD).
Some notable examples of international currencies include the Brazil currency ( Brazilian Real), Korean currency (Korean Won), Thailand currency (Thai Baht), Turkey currency (Turkish Lira), Vietnam currency (Vietnamese Dong), Poland currency (Polish Zloty), Sweden currency (Swedish Krona), Denmark currency (Danish Krone), Indonesia currency (Indonesian Rupiah), Singapore currency (Singapore Dollar), Czech currency (Czech Koruna), South Korea currency (KRW), Egyptian currency (Egyptian Pound), Swiss currency (Swiss Franc), Hong Kong Dollar, Malaysia currency (Malaysian Ringgit), and Israel currency (Israeli Shekel)
These currencies represent various economies with unique characteristics and are actively traded in the global foreign exchange market. Exchange rates for these currencies fluctuate based on economic factors, market conditions, and geopolitical events, shaping their values relative to other currencies.
The US dollar is generally seen as the most powerful currency in the world and certainly the most traded currency in the global financial market. The USD is also the largest reserve currency in the world. However, the greenback is not the strongest of the fiat currencies recognized as legal tender worldwide.
Based on their relative value against the US dollar, here are the top 10 strongest currencies in the world as of June 2023.
The exchange rates are the rates at which one currency can be exchanged for another. In other words, they represent the ratio between two currencies and determine the price at which one currency can be bought or sold in relation to another.
Exchange rates are quoted in currency pairs, such as USD/EUR or GBP/JPY, indicating how much of one currency is required to purchase one unit of the other currency.
Understanding exchange rates is crucial for sending money abroad, making investment decisions, and managing currency risk management. They reflect the economic factors and market forces influencing the demand and supply of a currency.
Exchange rates can be classified into two categories:
Fixed and floating exchange rates are two different systems used to determine the value of one currency in relation to another.
In a fixed exchange rate system, the value of a currency is set and maintained at a fixed rate against another currency or a basket of currencies. This rate is typically established and controlled by a country's central bank or monetary authority. Governments may choose to fix their currency to another currency, such as the U.S. dollar, or a commodity like gold.
An example of a fixed exchange rate is that of the Chinese Yuan (CNY). The People's Bank of China (PBOC) maintains a fixed exchange rate for the CNY against a basket of currencies, with the U.S. dollar being the predominant reference. The PBOC intervenes in the foreign exchange market to manage fluctuations and keep the exchange rate within a predetermined range.
The advantages of fixed exchange rates include stability and predictability in international trade and investment. They can promote confidence in a country's currency and reduce currency risk for businesses engaged in cross-border transactions.
However, maintaining a fixed exchange rate requires significant intervention by the central bank and limits its flexibility to respond to economic changes.
In a floating exchange rate system, currency values are determined by market forces of supply and demand. The exchange rate fluctuates freely based on factors such as interest rates, inflation, economic performance, political stability, and market sentiment. Governments do not actively intervene to control or fix the exchange rate.
For example, the United States has a floating exchange rate system, where the value of the U.S. dollar is determined by market forces of supply and demand. The Federal Reserve influences interest rates and monetary policy but does not actively intervene to fix the exchange rate.
Floating exchange rates provide flexibility for currencies to adjust based on market conditions, allowing them to find their equilibrium levels. This system allows for automatic adjustments to external shocks and economic imbalances. However, floating exchange rates can be volatile, which introduces uncertainty for international trade and investment, as exchange rates can vary significantly over time.
It's worth noting that countries can choose to switch between fixed and floating exchange rate systems depending on their economic policies and objectives.
Many countries today adopt a mixed exchange rate system, also called managed float system, that combines elements of both fixed and floating systems. In this system, the exchange rate is influenced or guided by government intervention to avoid extreme fluctuations. This approach aims to strike a balance between stability and flexibility.
For example, India follows a managed floating exchange rate system. The Reserve Bank of India (RBI) actively manages the Indian rupee (INR) against a basket of currencies, primarily focusing on the U.S. dollar. The RBI intervenes in the foreign exchange market to smoothen excessive volatility and maintain orderly conditions.
Exchange rates are influenced by a variety of factors, including the supply and demand for currencies in the foreign exchange market. Economic indicators, such as inflation rates, interest rates, trade balances, and political stability, can impact the demand for a currency and consequently affect its exchange rate.
Exchange rates are also influenced by market speculation and government interventions, as central banks may adjust interest rates or engage in currency market operations to influence the value of their currency.
These factors can be summarized as follows:
Yes. Exchange rates matter when sending money abroad. Being aware of exchange rates and seeking favorable rates can help ensure that you, as a sender, maximize the value of your transfer and provide your recipient with the most beneficial outcome.
Value of the Transfer: Exchange rates determine the conversion of one currency to another. When sending money abroad, the exchange rate determines how much of the sender's currency will be converted into the recipient's cash. A favorable exchange rate can result in the recipient receiving more funds, while an unfavorable exchange rate can reduce the value of the transfer.
Cost of the Transfer: Exchange rates impact sending money abroad. If the exchange rate is unfavorable, it means that the sender's currency will have a lower value when converted to the recipient's currency. As a result, the sender may need to transfer a larger amount of their currency to achieve the desired value in the recipient's currency, resulting in higher transfer costs.
Timing of the Transfer: Exchange rates are subject to fluctuations due to various economic and market factors. The timing of the money transfer can significantly impact the exchange rate obtained. By monitoring exchange rate movements, the sender can choose a favorable time to initiate the transfer and potentially optimize the value of the transfer.
Cost Comparisons: Different service providers offer varying exchange rates for currency conversions. Comparing exchange rates among different providers can help the sender find the most favorable rate, allowing for more value to be transferred to the recipient.
Sending money abroad involves several steps to ensure a smooth and secure transaction.
There are different methods for sending money abroad, such as bank transfers, online payment platforms, or remittance services. You can compare fees, exchange rates, and delivery options to choose the most suitable method for your needs.
Collect the necessary information from the recipient, including their full name, contact details, and bank account information. Ensure you have accurate and complete details to avoid any delays or errors in the transfer.
Select a reputable service provider or institution to facilitate the money transfer. Consider factors such as fees, exchange rates, transfer speeds, and customer reviews when making your choice. Specialized money transfer companies are better than banks or other financial institutions, as they tend to have higher transfer costs, slower transfer speeds, and hidden fees.
Provide the required information to the service provider, including your details, the recipient's information, and the amount you wish to send. Double-check all details for accuracy before proceeding.
Follow the instructions provided by the service provider to pay for the transfer. This can usually be done through various methods such as bank transfers, credit/debit cards, or online payment platforms. Ensure you understand the fees and any additional charges associated with the payment.
After initiating the transfer and making the payment, the service provider will provide you with a confirmation or transaction reference number. Keep this information safe and use it to track the progress of the transfer. Most service providers offer tracking options to monitor the transfer's status.
Inform the recipient that you have sent them money and provide any necessary transaction details or reference numbers they may need to receive the funds. Advise them to monitor their account for the incoming transfer.
Understanding international currencies and exchange rates is important for anyone engaging in global transactions. Having a comprehensive knowledge of different currencies and their dynamics will empower you to navigate the complexities of the global economy more effectively.
It is advisable to compare the available options before finalizing your decision when sending money overseas. While banks may seem convenient for international transfers, specialized money transfer providers offer superior exchange rates, transparent and affordable fees, and speed.
Use the CompareRemit compare tool to view today's best exchange rates when sending money overseas!
Growth in digital remittances can be a game-changer in international remittances, mainly in terms of reducing the cost of global money transfer, increasing accessibility, and being more customer-centric. In the case of Nepal, which is one of the highest recipients of remittances in the world, youth are leading the mobile and digital revolution in the country. 50% of the users of eSewa, Nepal's most prominent digital wallet, are between the age of 18 to 30 years. With eSewa, users can make various payments such as pay utility bills, pay internal bills, recharge phones, book airline, and bus tickets, scan and pay to merchants, make a bank transfer (from eSewa to a bank account), and so on. There are also cashback and reward points upon registration. Established in the year 2019, eSewa Money Transfer is affiliated with F1Soft Group. With 15 million users (almost half of the country's population), F1Soft has been the leading fintech company in Nepal since 2004. eSewa is licensed by Nepal Rastra Bank under foreign exchange regulation, so it is a safe and highly regulated mode of money transfer. It offers traditional brick-and-mortar and agent-based remittance services along with the non-traditional digital modes of remittance.Money Transfer Services from the U.S. to Nepal with eSewa eSewa is partnered with various leading money transfer companies such as MoneyGram, WorldRemit, Remitly, Skrill Money Transfer, TerraPay, WireBarley, enabling customers from the U.S. to send money to friends and family in Nepal directly into the recipient's bank account or eSewa wallet.The account deposit service is available in more than 65 banks in Nepal. With more than 4.2 million registered eSewa wallet users, the addition of remittance service to eSewa wallet will provide a boost in remittance inflow to Nepal.Remittances to Nepal constitute a major portion of the country's foreign exchange reserve, surpassing both the official development assistance and the total foreign direct investment. In 2019, Nepali migrant workers sent home $8.64 billion which constituted 25.4% of the country's GDP. Sending Large Amount of Money from the U.S. to NepalThe U.S. to Nepal money transfer corridor is a thriving one, with many money transfer operators competing for business. Here are the top 5 money transfer service providers from the U.S. to Nepal.XoomPayPal-owned Xoom, a leading digital money transfer provider is one of the fastest, secure and convenient ways to send money from the U.S. to Nepal. The Xoom mobile app or website allows users in the U.S. to send money in an instant to friends and family in Nepal using their U.S. bank account, debit card, or credit card. Xoom has partnered with major banks in Nepal - Everest Bank Ltd., Nabil Bank, Himalayan Bank, Nepal SBI Bank, and others offering instant bank deposits. The money can be transferred to a bank account or picked up from an agent location (from over 4000 cash pickup locations) in Nepal. The maximum transfer amount is $9,000 per transfer when using Xoom transfer. The transfer fee varies depending on the method. Bank transfers are usually free of cost. Fees for payments by card are percentage-based.Do keep in mind that a margin is added to the exchange rate when converting U.S. dollars (USD) into Nepalese rupees (NPR).Wise (formerly known as TransferWise)Wise (Ex-TransferWise) is a London-based financial technology company regulated by (Financial Conduct Authority) FCA in the UK. For online money transfers from the U.S. to Nepal, Wise is a secure, fast, and low-cost option. There are no hidden charges, no marked-up exchange rate. Wise gives you the interbank exchange rate for your transfers. You can pay by direct debit, bank transfer, debit card, or credit card. Bank debit or ACH is the cheapest followed by bank transfer. While payment via credit cards has more fees. Depending on the transfers, the money can be reached in one day or even within seconds. There are limits to how much you can send to Nepal. For larger transfers, Wise might ask you to provide your ID card. To initiate the transfer process, sign up online or in Wise's app for free.WorldRemitWith WorldRemit, Nepalese immigrants in the U.S. can send money online to recipients in Nepal. The money can be received via cash pickup, bank deposits, mobile money, and even airtime top-up.The cask can be pick-up from thousands of Samsara, NIC Asia, and Citizen Bank locations within minutes. The bank transfer may take 1 business day.You can send up to $5,000 per transfer with bank transfer and up to NPR 300,000 with the cash pick-up option. A maximum amount of NPR 1,000,000 can be sent in a day. The transfer fee will depend on the transfer amount. WorldRemit adds a margin to the exchange rate.Muncha Money TransferMuncha money transfer lets you send money to Nepal from all the 50 states in the U.S. It is a preferred choice for many NRN (Non-resident Nepalese) as an online payment gateway. Muncha Money Money Transfer and ThamelRemit are popular ways of sending money.An individual with a U.S. bank account can transfer money to the recipient's bank account in Nepal. It takes about 48 hours to complete the transfer. It is licensed by Nepal Rastra Bank, so your money is safe and protected. It offers ACH transfer and can send up to $10,000 per transaction from the U.S. to Nepal. The first transaction is free for all customers.ThamelRemitThamelRemit is an online money transfer platform for sending money from the U.S. to Nepal. It is trusted by more than 50,000 Nepalese in the U.S.The platform is supported by Siddhartha Bank Ltd., one of the fast-emerging banks in Nepal, and is powered by MachNet.The transfer is carried out via ACH where money is directly debited in USD from your bank account in the U.S. and transferred to the recipient's bank account in Nepal in NPR. There is no charge or bank processing fee within Kathmandu Valley.Outside Kathmandu Valley, there may be a bank processing fee that is deducted from the recipient's bank account as per the particular bank's rules and regulations. The exchange rates offered are highly competitive and fees are affordable. You can send up to $10,000 per transaction and get the money deposited into the destination account in 48 hours.TakeawayThanks to the increasing number of users of digital payment platforms like eSewa and others, the cashless transaction is becoming a reality in Nepal.The above list is not an exhaustive list of all the services available to send money from the U.S. to Nepal. It can be difficult to choose one from a plethora of options. Before you make the transfer, compare the money transfer service providers to get the best value for your money while sending money from the U.S. to Nepal.Nepalese living abroad prefer to send remittances directly through mobile banking, internet banking, or digital wallet. It offers ease of use, convenience, lower cost, and a competitive marketplace of the money transfer industry that gives better service and better exchange rates.
How do you pay your employees? As an employer, paying your employees is an important part of your business. Direct deposit to your employee's bank account or issuing paper checks are two of the most common ways of compensating them. Gone are the days when employees used to get paid in cash.But what happens when some employees have no bank accounts? This is where paycards come in. Paycards for employees are an alternative option when the employees do not own a bank account, and the employers do not want to pay in hard cash.It is estimated that about 5.4% of U.S. households (approximately 7.1 million) were "unbanked" in 2019, according to the U.S. Federal Deposit Insurance Corporation (FDCI). An unbanked household means no one in the household had a checking or savings account at a bank or a credit union.For small businesses with employees with no bank accounts, paycards can be a convenient option as a payment option.Direct deposit and paycards both offer the benefit of a paperless payroll distribution process and allow the employer to electronically transfer funds conveniently. While direct deposit is the norm for many businesses, paycards are gaining popularity each year.There are pros and cons of using paycards, and in this blog, we will discuss if paycards are right for your business and employees.What is a Paycard?Paycard is a lot like a prepaid debit card as it is made of plastic and can be pre-loaded. In the case of a paycard, the money loaded comes from the employer in the form of an employee's pay. The card carries the issuer name such as MasterCard, Visa, or Discover.Are Paycards Good, and Who is it For?A pay card can be used to pay an employee who does not have a bank account. Paycard holders or employees can cash out from paycards at a bank, ATM, or other point-of-service locations.Employees can also pay bills over the phone using their paycard number or authorize electronic bill payments to specified companies.Employees can use paycards at any merchant, grocery store, retail shop, or gas station that accepts debit cards.Do Paycards Have Fees?By law, employees must be able to access their wages in full without any fees. They can obtain the cash at a bank teller, ATMs associated with the card issuer, pay bills by telephone, or use the card for point-of-sale purchases.However, there may be fees for electronic fund transfers or for cash withdrawals at ATMs that are not in the issuer's network. There may be fees for card replacements, balance inquiries, inactivity fees, or other reasons. The Consumer Financial Protection Bureau issued a rule in April 2019 that paycard issuers must disclose all the fees to cardholders.Employees must be informed of the potential fees. The paycard issuer is required to give you disclosures on such fees before you sign up for a paycard or a payroll card.Also, paycards are regulated by state laws, so you might have to check for additional details depending on your state. Some states are making efforts to reduce fees that affect employees.As you can see, paycards fees mostly affect employees. In the case of direct deposits, employers are the ones who have to pay fees for setting up the payroll distribution system and a transaction fee for each time they transfer wages into an employee's account. The payroll software may also charge a fee for their service.Can Employers Save Money When Using Paycards?Since paycards are reloadable cards, employers can have the banks reload the paycards with their employees' wages for the pay period, avoiding the costs and hassle of issuing paper checks, mailing them, or re-issuing lost checks. The savings may not be a substantial amount but they can add up gradually.Can Employers Choose between Direct Deposit and Paycards?While there is no mandate that employers can only offer either direct deposit or paycards to their employees for their wages, it is safe to check with your state's law on payroll distribution.One-third of states allow employers to require employees to have bank accounts for direct deposit. In such a case, paycards may not be needed. Also, there is no law preventing employees with bank accounts to opt for paycards as their payment option.Though generally, employees tend to prefer direct deposit because of its efficiency and the least costly method of payment, as a business owner or an employer, it is better to give options instead of imposing only one method.Ask your employees about their preferred method of payment and what benefits (convenience, low fees, etc.) serve them the best.In fact, Federal law requires employers to offer alternative payment methods like paper checks or direct deposits.Should Employer Provide Pay Stub?Pay stub provides details of the employees' pay for each pay period. Employers are not required by federal law to give employees their pay stubs. However, many states have laws that require some form of written pay statement.Even if your state doesn't need you to provide pay stubs, you are still required by the Fair Labour Standards Act to keep track of your employees' working hours.For employees, a pay stub gives a record of their wages, deductions, contributions, and other information. It is also proof of income or employment, which is often needed when applying for a loan, credit card, or housing.For employers, a pay stub is useful for tax purposes, and it can be used to resolve any discrepancies with employee pay.Is it Possible for Paycards to be Overdrafted?Usually, paycards works like debit card, allowing cardholders to withdraw up to the limit of the loaded amount. However, there are paycard that allows overdraft for employees. But it can come with hefty overdraft fees if employees use funds over the limit in their account. Usually, you should be able to prevent misuse by subscribing to an overdraft protection service.Will Paycard Affect Credit Score?Paycards, like all prepaid cards, do not affect an employee's credit score.What is a Paycard Gets Lost or Stolen?A replacement card can be issued in such cases. The employee needs to notify the employer, and then the employer should immediately notify the card issuer. The employee is not liable for the incident as long as the issue is timely reported. Paycards come with similar protection as that of a prepaid card.The reporting time is determined by the card issuer. If you wait longer to report after learning of the loss and theft, the fraudulent charges may increase. You may have to pay a fee for the replacement card.Pros and Cons of PaycardsProsA win-win situation for unbanked employees and their employers.Green alternative to paper checks.Immediate payment to employees.No hassle of cashing a paycheck.No monthly or maintenance fees.Added security when assessing their funds (paycards require a PIN).Employees can report to the issuer if funds are used unauthorized.Paycards can be reloaded during each payday, saving money on issuing paper checks.Added efficiency for the employer as the employer would not have to physically present or mail paychecks to unbanked employees.ConsEmployees may incur fees for several reasons. Be aware of such potential fees.Employers have certain responsibilities to educate employees about the usage of paycards.Limited range of services and flexibility in managing your funds compared to bank accounts and other prepaid cards.The best paycards programs are easy to set up, have lower fees, quick access to funds, and provide a range of benefits such as cashback and discounts. We have made a list of popular paycards providers for businesses:Wisely Paycard by ADPOnline portal and mobile appCompatible with Apple Pay, Samsung Pay, and Google PayZero cost sign upNo hidden feesNo credit checkNo overdraft feeZero cost direct deposit of pay and other sources of income (including government benefits)Accepted wherever Visa is acceptedKeep track of spending and account balances 24/7 on the appGet cash back at major retailersSurcharge-free ATM withdrawalsFDIC insuredSecurity features include instant card lock, purchase protection, and travel alert notificationsRapid PaycardDirect Deposit onto rapid paycardLoad funds from approved checks with Ingo Money mobile appsNo fee for cashing paycheck24/7 account access with rapid! Access mobile appNo credit checkCan be used at ATMs, merchants worldwide, wherever Debit Mastercard or Visa debit cards are acceptedPay bills and make purchasesBook airline and hotel reservations onlineEarn interest on savings accountGet cash back rewardsFDIC insuredMoney protected with Zero Fraud LiabilityKittrell PaycardNo fees to use (there are fees for certain situations)Fee-free ATM network with MoneyPassWebsite and Kittreall AppGet real-time alerts and push notificationsCash back at point-of-sale terminals2-way texting to manage your card and accountCompatible with Apple Wallet, Google Pay, Samsung PayEasy portability (Get direct deposit of stimulus checks, tax refund, benefits)Freeze or unfreeze card on-demandSkylight PaycardZero sign up feeNo credit checkNo minimum balance Personalized your card with a family photo or unique imageManage money anywhere on Mobile AppDirect deposit your government benefits, tax refundsUse anywhere where Visa Debit & Debit Mastercard are acceptedFDIC insuredZero liability protectionPay bills onlineEarn interest on savings accountEarn cash back with Payback RewardsSend money to or receive money from friends and family with Netspend cardsSet text alerts about transactionsRefer a friend and boost your card balanceSkylight overdraft limit is $100 & 3 times/ monthConclusionOverall, paycards can be convenient and cost-effective for employees and employees when compared to paychecks or for those employees with no bank account. And the paycard fees are becoming more transparent and competitive.While paycards can be challenging at times, especially when you are employed in multiple jobs and have a separate paycard with each employer, your funds are scattered in multiple cards so it becomes difficult to manage your finances. Some may prefer to put all their money in one place, like a checking account.However, if you can't open a bank account, a paycard is a great option to get paid. Read the fine prints before signing up for a paycard and know the potential fees that come with it.
It is common for a Non-Resident to open an NRE Account or other similar accounts, with a bank in India and transfer their earnings from their foreign country into these accounts. NRI's are not required to pay taxes in India on earnings that they received outside of India however these guidelines are frequently abused. An influx of cases of money laundering and unexplained funds in NRE accounts has prompted the Enforcement Directorate of India (ED) to crack down on irregularities in NRE account activities.In one specific example, an individual transferred a large number of funds into a family members' NRE account. Upon investigation by the ED however, it was found that these funds were commission income which was generated abroad. He was then asked to furnish the overlaying contracts for these commission incomes and was penalized accordingly.As an NRI with an NRE account, it is very important that you are able to explain the source of your funds in your account should you be contacted by the ED. Failure to explain the source of your funds in your account is considered to be a violation and can result in tax penalties.In order to avoid being questioned by the ED in regards to NRE account activity, it is highly recommended that all NRI's protect themselves in the following ways:Distinguish between current account transactions from capital account transactions.Inform all applicable parties regarding any changes in residential status.Distinguish between Person Resident in India & Person Resident Outside India.Keep track of investments made in India from Rupee funds in India. For example, when their residential status is that of a Resident and the investments made from funds remitted from abroad and when their residential status is that of a non-resident.Understand the sale proceeds of movable and immovable assets in India.Comply with statutory guidelines for filing documents and reporting requirements for different transactions.Do not enter into capital account transactions that are prohibited or are not covered under general provisions of permission.Do not enter into current account transactions that are prohibited or restricted.Avoid participating in any " net - off " transaction with a resident individual.Never instruct or allow a resident to make an outward transaction on your behalf.The Foreign Exchange Management Act (FEMA) extends to all of India and makes offenses related to foreign exchange, civil offenses. Such offenses are not taken lightly by the Indian government, which is why it is imperative that these guidelines are abided by and taken seriously as any violations will likely result in penalties and legal action. Running into issues with your NRE account and have to deal with the ED can be extremely stressful and nerve-wracking, which is why it is important to follow the above guidelines in protecting yourself from such circumstances.
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