In the morning before trading hours, if you drink coffee while reading economic news, the economic news will always present the buying rate and selling rate. Speaking of buying and selling rates, do you know how to read buying rates and selling rates? And what effect will it have on the Indonesian economy? And what effect does it have on stock prices? Please read this post to the end.
Buying rate = The exchange rate used when the bank buys foreign currency (When you sell foreign currency).
Selling rate = The exchange rate used when the bank sells foreign currency (When you sell foreign currency).
Middle rate = Average buying rate and selling rate
So, to make it easier for you to understand more quickly, the buying and selling rates are seen from the bank's side. If the exchange rate is buying, it means that the bank is buying foreign currency (people are selling it). If the selling rate is, it means that the bank is selling foreign currency (people are buying it).
ILLUSTRATION (I used the illustration of the Rupiah exchange rate against the USD)
Buying rate = Rp12,800
Selling rate = IDR 13,000
How to read the exchange rate above: Banks buy Rp12,800 of your money for 1 Dollar (USD). Meanwhile, banks will sell 1 USD worth IDR 13,000.
If you notice, the selling rate is always greater than the buying rate. This is an advantage for the bank. That's why the selling rate is always > the buying rate. So if you refer to the example above, then there is a difference between the selling rate and the buying rate of Rp. 200. Rp. 200 is the bank's profit. The selling rate is set higher than the buying rate with the aim that banks and money changers can benefit more from selling foreign currency transactions than buying transactions.
When are the buying and selling rates used?
The buying rate is used when you get any money/income from abroad and you want to convert it into Rupiah. The selling rate is used when you want to exchange Rupiah for Dollars, when you buy goods from abroad.
An Example of Using Buy and Sell Exchanges
Calculation of Use of Selling Rate
For example, you want to buy goods in USD for $ 20, then you must first buy Dollars, using the selling rate (not the buying rate, do not reverse). So if you refer to the example above, you have to spend money in Rupiah amounting to: IDR 13,000 x 20 = IDR 260,000, to be exchanged into USD (260,000:13,000 = @ 20). .
Calculation of Use of Buying Rate
For example, you get an online shop income from abroad for $100 and you want to convert it into Rupiah. So what you use here is the buying rate (not the selling rate, don't reverse it). If you refer to the example above, then you will get rupiah money of $100 x Rp12,800 = Rp1,280,000
That is the understanding of the buying and selling rates of foreign currencies. Go to the next stage: What's the use of knowing the position of the buying rate and selling rate (especially for entrepreneurs)? What is the impact on the Indonesian economy? What is the effect of strengthening and weakening the exchange rate? And what effect does it have on the capital market (stock prices)? Read the post: Rupiah Exchange Rate Against the Business Sector.
