Spot rate, buy rate and sell rate
The quoted (spot) rate is an informational indicator. It is not a promise of the price at which a bank or currency service will execute a transaction.
A provider may quote a different rate when selling you currency than when buying it from you. The gap is called the spread, and sometimes there is also a commission. Therefore check how much you actually pay and how much you actually receive, not only the headline “no commission.” Yahoo rates shown on a website are market data, not the Bank of Israel’s quoted rate nor a binding commercial offer.
Example: the provider sells you a dollar at 3.70 ₪ and buys it back at 3.60 ₪. Converting 100 dollars there and back at those rates costs 10 ₪, even without a market move and before any additional commission.
State which currency is being bought, what you are paying with, and what will happen if its rate falls.
Bank of Israel · Exchange Rates ↗Check your understanding
Does the quoted rate oblige the bank to exchange at that price?
- Yes
- No
- Only when buying euros
Answer and explanation
No. It is an indicator; check the actual transaction rate and terms.
“No commission” means there is no cost to convert?
- Always
- Not necessarily, there can be a spread
- Only on weekends
Answer and explanation
Not necessarily, there can be a spread. Cost can be included in the gap between the buy and sell rates.
Continue learning
FX: What’s the price of a dollar? — FX means foreign currency. An exchange rate describes how many units of one currency equal one unit of another currency.
FOREX: Currency risk and leverage — Currency risk is a change in value because of an exchange rate movement. Leverage increases exposure relative to the money invested.