Currencies | What is the difference between money and letter?

Currency Exchange Rate
Currency Exchange Rate

When it comes to investments in currencies it is important to keep in mind the fact that the exchange rate is not always expressed in one price but in two. The first of these is called money or bid price or bid and means the price at which a trader is willing to buy the currency. The second is called letter or ask the course and indicates the price at which it is willing to sell the currency. These two variations vary continuously according to the conditions of the currency market and are expressed by a formula of the type bid / offer. For example, if a bank says as the spot price of the euro in terms of dollars is 1.4240 / 1.4244 it means that whoever is willing at that time to buy euro the exchange rate of $ 1.4240 per euro and selling them at a rate of $ 1.4244.

Exchange Rates

Exchange Rates

Also in the currency it comes to spreads, meaning by this term the difference between bid and ask prices. The spread is important because it is what provides liquidity to the market. As in other financial areas the spread widens when the market is characterized by uncertainty and jitters about a particular currency, the prices of which take sudden and large fluctuations.

Currency Exchange Rate

Currency Exchange Rate

In summary, we can therefore say that money means purchase while letter means sale. The spread is the range expressed as a percentage of the difference between the offers for sale and purchase bids.

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