💹 Spread
US Capital Private Bank Knowledge Base
Definition:
The Spread is the difference between the buying (bid) rate and the selling (offer) rate of a foreign currency for a given period.
Key Points:
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Represents the cost or margin for currency exchange providers or banks.
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The bid rate is the price at which a dealer is willing to buy a currency.
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The offer rate (or ask rate) is the price at which the dealer is willing to sell the currency.
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The spread reflects liquidity, volatility, and market conditions.
Importance:
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A narrower spread indicates a more liquid and efficient market.
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Wider spreads often occur during volatile or low liquidity periods and increase transaction costs for traders and businesses.
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