There’s no central place where currencies are traded.
Instead, large banks advertise an interbank rate that they will trade at - they do that by sending information to all the other banks through a wide range of e-trading platforms - including Bloomberg and platforms run by other banks like State Street, Deutsche etc.
There is a huge volume of transactions happening every minute - so prices tend to harmonise very quickly. Banks set their prices based on their internal supply and demand. If a bank is offering a good price, other banks will deal with them until they have exhausted that bank’s offer. If a bank offers a bad price, no-one will trade with them until they raise their offer.
Information services like Bloomberg, MorningStar and many other capture that information and make it publicly available - normally on a slight delay to the general public.
Many governments also require banks to report to them on fx rates in parallel to the above.
youknowthathing t1_ixyd5cp wrote
Reply to ELI5: Who actually adjusts a currency exchange rate using global supply and demand data? by nowjeon906
There’s no central place where currencies are traded.
Instead, large banks advertise an interbank rate that they will trade at - they do that by sending information to all the other banks through a wide range of e-trading platforms - including Bloomberg and platforms run by other banks like State Street, Deutsche etc.
There is a huge volume of transactions happening every minute - so prices tend to harmonise very quickly. Banks set their prices based on their internal supply and demand. If a bank is offering a good price, other banks will deal with them until they have exhausted that bank’s offer. If a bank offers a bad price, no-one will trade with them until they raise their offer.
Information services like Bloomberg, MorningStar and many other capture that information and make it publicly available - normally on a slight delay to the general public.
Many governments also require banks to report to them on fx rates in parallel to the above.