What is a spot rate?

A spot rate is the current market rate at which a particular currency can be bought or sold for immediate delivery and payment. It is also known as the spot exchange rate or simply the spot price. Spot rates are constantly changing because they are influenced by a variety of factors such as supply and demand, economic and political events, and market conditions. They are used by individuals and businesses to determine the cost of international transactions, to hedge against currency risks, and to make investment decisions. Spot rates are also used as a benchmark for other types of exchange rates such as forward rates and cross rates. They are usually quoted with accuracy up to four decimal places.