Calculate The Cross-Rate of Argentinean Peso to Euro

A cross-rate is a derived exchange rate between two currencies that are not directly traded in the foreign exchange market. To calculate the cross-rate of the Argentinean peso (ARS) to the euro (EUR), we need to use intermediate currencies that are traded against both ARS and EUR.

What is a Cross-Rate?

A cross-rate is an indirect exchange rate between two currencies that are not directly traded in the foreign exchange market. It is calculated by combining two or more direct exchange rates.

For example, if you want to find the exchange rate between the Argentinean peso (ARS) and the euro (EUR), and there is no direct ARS/EUR pair, you can use an intermediate currency like the US dollar (USD) to calculate the cross-rate.

Key Point

Cross-rates are useful when direct exchange rates are not available or when you need to compare currencies that are not directly traded.

How to Calculate the Cross-Rate

To calculate the cross-rate of ARS to EUR, follow these steps:

Find the direct exchange rate between ARS and USD (ARS/USD).
Find the direct exchange rate between EUR and USD (EUR/USD).
Divide the ARS/USD rate by the EUR/USD rate to get the ARS/EUR cross-rate.

Formula

ARS/EUR Cross-Rate = ARS/USD ÷ EUR/USD

The result will give you the number of Argentinean pesos needed to buy one euro based on the current exchange rates.

Example Calculation

Let's say the current exchange rates are:

ARS/USD = 100 (100 Argentinean pesos = 1 US dollar)
EUR/USD = 1.10 (1.10 euros = 1 US dollar)

Using the formula:

ARS/EUR Cross-Rate = 100 ÷ 1.10 ≈ 90.91

This means that 90.91 Argentinean pesos are needed to buy 1 euro.

Note

Exchange rates fluctuate frequently, so the actual cross-rate may differ from this example.

Interpreting the Cross-Rate

The cross-rate tells you how much of one currency you need to exchange for another currency using an intermediate currency. A higher cross-rate means that more of the first currency is needed to buy one unit of the second currency.

For example, if the ARS/EUR cross-rate is 90.91, it means that the Argentinean peso is weaker relative to the euro compared to the US dollar.

Implications

A higher cross-rate can indicate that the first currency is weaker or that the intermediate currency is stronger.

FAQ

Why is the cross-rate different from the direct exchange rate?

The cross-rate is derived from two or more direct exchange rates, while a direct exchange rate is the rate at which two currencies are traded directly in the foreign exchange market.

How often should I check the cross-rate?

Exchange rates fluctuate frequently, so it's a good idea to check the cross-rate regularly if you're making international transactions or investments.

Can I use a different intermediate currency?

Yes, you can use any currency that is traded against both the Argentinean peso and the euro. However, the US dollar is commonly used as an intermediate currency.