Foreign exchange is an essential step in transacting business among countries that have different currencies. Foreign exchange conversion is performed by the gateway operator in the destination country before the item is sent to the receiving account. The amount of the transaction in local currency is determined by the prevailing exchange rate and the applicable spread. Although the basics are the same, there are important differences by country. See the calculations below for specifics of the foreign exchange methodology for credits and returns (and debits where available) in each country. For details on the spread and settlement date in each country, read Exchange Rates for FedACH International Customers.

For more about foreign exchange in general, see the Federal Reserve Bank of New York's publication entitled The Foreign Exchange Market in the United States by Sam Y. Cross.

CALCULATION EXAMPLES

Canada: Credits to, Debits to, Returns from

Mexico: Credits to, Returns from

Switzerland: Credits to, Returns from

Austria, Germany, Netherlands**: Credits to, Returns from

United Kingdom: Credits to, Returns from

Credits to Canada
The spread is included in the posted exchange rate in Canada. The calculation below is to send a US$150 credit when the Effective FX Rate for Canada-Credits is 1.1568. The amount of the local currency transaction can be calculated by multiplying the amount of U.S. dollars sent by the Canadian Dollar exchange rate on the settlement date.

Debits to Canada
Calculating the foreign exchange on a debit is similar to a credit. Refer to the Effective FX Rate for Canada-Debits on the Date FX Performed and multiply by the U.S. Dollar amount.

Returns from Canada
When an item is returned, the exchange rate on the return varies depending on whether the item was originated as a credit or a debit. The exchange rate for credit returns is the same as that day’s Effective FX Rate for debits that are originated in the U.S. Similarly, the exchange rate for debit returns is the same as that day’s Effective FX Rate for credits that are originated in the U.S. In either case the applicable Effective FX Rate will be the rate on the date the foreign exchange conversion is applied to the return.

The CAD amount will be divided by the applicable Effective FX Rate for returns. The amount returned may not be the same as the amount originated because the item has to be converted from local currency to U.S. dollars in order to be sent back to the United States. Thus, the amount returned could be more or less than the USD amount originated. Of course, fixed-to-fixed (FF) items will be returned in the same USD amount since there is no foreign exchange involved. Below are return examples based on the credit and debit examples above:

Credits to Mexico
Calculation to send US$150 item to Mexico where the dollars are converted into pesos. Assuming the Banco de México FIX rate on the Mexican settlement date is 10.9054 and the spread is 0.21 percent:

Returns from Mexico
When an item is returned, the exchange rate is calculated based on the Banco de México FIX rate on the day of the return plus a spread of 0.6%. The amount returned may not be the same as the amount originated because the item has to be converted from local currency to U.S. dollars in order to be sent back to the United States. The returned amount could be more or less. If the same item used in the previous example were returned on a day when the foreign exchange rate is 10.8753:

Credits to Switzerland
The spread is included in the posted exchange rate in all Transatlantic Service countries. In Switzerland, the amount of the local currency transaction can be calculated by multiplying the amount of U.S. dollars sent by the Swiss PostFinance exchange rate on the settlement date.

Returns from Switzerland
When an item is returned, the exchange rate is calculated based on the Swiss PostFinance exchange rate on the day of the return. The amount returned may not be the same as the amount originated because the item has to be converted from local currency to U.S. dollars in order to be sent back to the United States. The returned amount could be more or less. If the same item used in the previous example were returned from Switzerland on a day when the exchange rate is 1.2894:

Credits to Austria, Germany and the Netherlands**
The spread is included in the posted exchange rate in all Transatlantic Service countries. In Austria, Germany and the Netherlands, the amount of Euros converted from dollars can be calculated by dividing the amount of U.S. dollars sent by the respective gateway operator's exchange rate on the settlement date.

Returns from Austria, Germany and the Netherlands**
When an item is returned, the exchange rate is calculated based on the respective gateway operator's exchange rate on the day of the return. The amount returned may not be the same as the amount originated because the item has to be converted from local currency to U.S. dollars in order to be sent back to the United States. The returned amount could be more or less. If the same item used in the previous example is returned from one of these three Transatlantic Service countries (that use the Euro) on a day when the exchange rate is 1.1735:

Credits to the United Kingdom

The spread is included in the posted exchange rate in all Transatlantic Service countries. In the United Kingdom, the amount of the local currency transaction can be calculated by dividing the amount of U.S. dollars sent by the gateway operator's exchange rate on the settlement date.

Returns from the United Kingdom
When an item is returned, the exchange rate is calculated based on the gateway operator's exchange rate on the day of the return. The amount returned may not be the same as the amount originated because the item has to be converted from local currency to U.S. dollars in order to be sent back to the United States. The returned amount could be more or less. For a return on the same item used in the previous example on a day when the exchange rate is 1.6456: