Present-Clue-101 t1_ixycjj5 wrote on November 27, 2022 at 9:39 AM

Techncially there isn't a single source and formula. Every company that publishes FX data (Bloomberg, Financial Times etc...) collects data from hundreds of sources such as banks, brokers etc... to come to a conclusion which is usually around the same ballpark due to similar methodology (especially considering that an FX rate can go into many digits after the decimal point). And generally everyone in the market will sell for around the same rate, with any "exceptions" being accounted for and excluded by the methodology. If someone were to sell/buy a large amount of a currency at a rate that deviates from the general FX rate, then it is likely that that currency trade would change the FX rate for the entire market.

The central banks also publish their own FX rates, but whether they themselves consider the rates to be "authoritive" differs from country to country.

Another authoritive source may be interbank exchange rates that are established by banks when they want to trade with each other - it is this rate that Google publishes and usually everyday retail FX rates are more expensive.

nowjeon906 OP t1_ixyctaf wrote on November 27, 2022 at 9:43 AM

Could you elaborate who is the "etc" beyond banks and brokers?

Do all these organizations have a similar degree of access to data regarding international trade done between two currencies?

Present-Clue-101 t1_ixyf331 wrote on November 27, 2022 at 10:16 AM

It's complicated because Bloomberg, Reuters and the Financial Times are usually top-level economic data companies that many banks themselves will source data from, but these media companies will in-turn source their data from the banks. Other sources include the central banks, brokers, IMF, statistics companies, investment mangagement firms, investors, companies that deal in large amounts of FX, etc... basically anyone who is considered by the media company to be affecting FX rates.

The top three that I listed above certainly have similar levels of access to financial data for live FX rates, but technically media companies will compete to provide the best FX rates possible so obviously there will be differences between companies.