What are mid-market exchange rates?

  • ERemit
  • 2 minutes read

Overseas transactions always involve selling one currency to buy another - for example, selling Australian Dollars to buy Indian Rupees or Philippine Pesos - at a specified exchange rate. Another term you need to be aware of while conducting international money transfer is the mid-market exchange rate. Let us see what it means!

The mid-market rate, also known as the middle or interbank rate, is the middle point between the buying and selling prices of the currencies at a given time. Basically, it is the halfway of the exchange rate between a currency’s bid (the highest price the buyer is willing to pay for the currency) and ask (the lowest price the seller is willing to accept) rates.

Here is how the middle rate is calculated by using the median (midpoint) of the bid and ask (offer) rates.

Middle rate = (bid rate + ask rate) ÷ 2

It is to be noted that mid-market exchange rates are always in flux with the rising influence of the global forces, demand and supply, and economic influences. As the mid-market rate is the rate at which currencies are bought and sold, it can be said as the fairest rate you can ever obtain.

Mid-market rate can be said to be a measuring ladle upon which you can compare the services offered by money transfer providers and banks to determine which one can hook you up with better deals. Let us also state the fact that it is very unlikely that the exchange rates offered by banks and other transfer service providers will be equal to the mid-exchange rates. Why? Because they set their own exchange rate margins to profit from international money transfers. However, the exchange rate margins can vary dramatically between different service providers or banks, sometimes in terms of 0.1%, sometimes upto 10%.

So, if you wish to save big bucks on international money transfers, transfer money as close to the mid-market exchange rate as possible. The closer you are to the mid-market exchange rate, the more money your beneficiary will receive on the other side of the loop. So be wise when you choose the best online money transfer in Australia, compare and contrast to see which one offers favourable exchange rates that comes to your advantage.