Bid FX Rate

The bid FX rate is the price at which a dealer, bank, broker or exchange office is prepared to buy a currency. Seen from the other side, it is the rate a customer gets when they sell that currency to the dealer. Every two-way exchange rate quote has a bid and an ask (or offer), and the bid is always the lower of the two when both are expressed in the same direction, because the dealer buys low and sells high.

The bid only makes sense alongside the ask and the mid-market rate, which sits halfway between them. The distance between bid and ask is the FX spread, the main way dealers and market makers earn money and cover risk. In retail currency exchange, the bid appears as a "we buy" rate on an exchange board, and the gap between it and the mid-market rate is effectively an FX markup paid by the customer.

Think of a second-hand bookshop. It will buy your old novel for a small amount and sell the same book to the next customer for more. The price it pays you is its buying price; the price on the shelf is its selling price. The difference keeps the shop open.

Currency dealers work the same way, with money as the stock. The bid rate is what the dealer pays you for your currency, and the ask rate is what it charges when you buy currency from it. If you are holding foreign cash after a trip and want to swap it back, the bid rate is the one that applies to you.

Exchange rates are quoted for a currency pair, written as base currency / quote currency, for example EUR/USD. The number tells how many units of the quote currency one unit of the base currency costs. An illustrative dealer quote of EUR/USD 1.1650 / 1.1652 means:

• Bid 1.1650. The dealer will buy one euro and pay 1.1650 US dollars for it, so a customer selling euros receives this rate.
• Ask 1.1652. The dealer will sell one euro for 1.1652 dollars, so a customer buying euros pays this rate.
• Mid 1.1651. The average of the two, used as a reference rate by data providers and many fintech apps.

The bid always refers to the base currency. Selling dollars for euros in the same quote means buying euros, so the customer pays the ask. Confusion between "buying" and "selling" is common when a quote is turned around or when a bureau displays rates per unit of home currency, which is why retail boards often label columns "we buy" and "we sell" instead.

The spread as a share of the mid-market rate is:

The cost to a customer who sells currency at the bid, compared with the mid-market rate, is:

• $C$ is the cost, in the quote currency.
• $Q$ is the amount of base currency sold.
• Mid and Bid are the mid-market and bid rates for the pair.

In the interbank example above, the spread is $(1.1652 - 1.1650) \div 1.1651 \times 100 \approx 0.017\%$, and selling 10,000 euros at the bid costs $10{,}000 \times 0.0001 = 1$ US dollar against the mid. Now take an illustrative airport bureau that buys euros at 1.10 and sells at 1.23, with the same mid of 1.1651. A traveller selling 1,000 euros receives 1,100 dollars; at the mid they would have received about 1,165 dollars, so the cost is $1{,}000 \times (1.1651 - 1.10) \approx 65$ dollars, or about 5.6%.

In the wholesale foreign exchange market, bids come from banks, non-bank liquidity providers and electronic market makers, and are shown on trading platforms and in an order book. The best bid is the highest price any participant is offering to pay at that moment. Spreads widen when liquidity is thin (late on Fridays, around major data releases or holidays), when volatility is high, for large trade sizes, and for exotic currencies with fewer active dealers. A fast-moving market may also fill an order at a worse rate than quoted, known as slippage.

Retail bids are set further from the mid. A bureau de change, a bank branch or a card issuer sets its bid using a wholesale reference plus a margin that covers cash handling, rent, credit risk and profit. That is why wholesale FX prices and tourist rates can differ by several percent.

In cross-border payments the bid rate is often hidden inside a single converted amount. A sender converting dollars to pesos through a bank or a provider of remittances receives the provider's buy rate for dollars, which includes its margin. Card payments abroad, dynamic currency conversion at terminals and multi-currency wallets all apply similar buy and sell rates. Consumer rules in several jurisdictions, including the US remittance transfer rule and the EU's cross-border payments regulation, require providers to disclose the exchange rate used or the total currency conversion charges before payment, which helps customers compare bids with the mid-market rate. Businesses that receive foreign currency regularly manage the gap through currency exchange providers with tighter pricing, forward contracts and hedging against foreign exchange risk, and often use the spot rate as a benchmark.

• CFPB: Regulation E, 12 CFR 1005.31 (remittance transfer disclosures)