Foreign Currency Exchange

What is Foreign Currency Exchange?

Foreign currency exchange is the process of converting one national currency into another at an agreed-upon exchange rate, enabling cross-border transactions for businesses, travelers, and financial institutions. Exchange rates fluctuate continuously based on economic data, interest rates, geopolitical events, and supply and demand in global currency markets. According to the BIS 2025 Triennial Central Bank Survey, trading in over-the-counter foreign exchange markets reached $9.6 trillion per day in April 2025, making it the largest and most liquid financial market in the world [1].

For business travel programs, foreign currency exchange is less about macroeconomics and more about transaction-level costs. Every time an employee pays for a flight, hotel, or meal in a foreign currency using a company card, an exchange occurs. Those conversions carry fees: foreign transaction charges, card network markups, and sometimes dynamic currency conversion premiums. These costs rarely appear as a single line item in T&E reports, but they accumulate across a travel program to represent meaningful overhead.

How does a foreign exchange rate work?

Exchange rates are the price of one currency expressed in another. Two rate types matter most for corporate travel:

• Spot rate: The current rate for immediate conversion, applied when an employee uses a corporate card abroad. The card network converts at a rate close to the interbank rate and adds its own small markup.
• Forward rate: A rate locked today for a future exchange, used by treasury teams managing predictable foreign currency obligations such as local payroll or supplier contracts. Day-to-day travel expenses settle at spot rates.

The interbank rate (also called the mid-market rate) is the baseline banks charge each other. Business credit cards typically charge 1-3% above this baseline in foreign transaction fees per purchase [2]. At a 2% blended rate, a company with $500,000 in annual international card spend absorbs $10,000 in FX fees before a single hotel or meal policy discussion.

What is dynamic currency conversion (DCC)?

Dynamic currency conversion is an optional checkout service offered at international hotels, restaurants, and ATMs. It presents the bill in the traveler's home currency rather than the local currency, making the total visible before signing. The problem: DCC rates apply above the interbank mid-market rate, adding a hidden premium on every transaction that accepts the offer.

Business travelers who accept DCC pay the merchant's conversion rate rather than their card network's rate, which is typically more favorable. Finance teams that don't address DCC in travel policy absorb an untracked surcharge across all international transactions. On $200,000 in international spend, a 2.5% DCC surcharge adds $5,000 in avoidable cost annually. The correct guidance for travelers is straightforward: always decline DCC and pay in local currency.

Foreign currency exchange by the numbers

Global FX markets reflect the scale of cross-border commerce. Spot transactions alone accounted for $2.95 trillion in daily trading volume in April 2025 [1]. Corporate programs encounter this market through every card swipe and international wire payment.

The risk extends beyond transaction fees. Four in five North American corporates reported losses from unhedged foreign exchange risk in 2025, highlighting how currency exposure affects finance teams beyond simple conversion costs [3]. For travel programs, that exposure surfaces in budget variances when domestic currency weakens mid-quarter against the currencies of destination markets.

Consider a sales director who completes a two-week Asia-Pacific roadshow, making purchases in Singapore dollars, Japanese yen, and Australian dollars. Without automated FX tracking, the expense report arrives as a mix of three currencies that finance must manually convert before coding. If the director accepted DCC at hotel checkouts in Tokyo, those charges settled 3-4% above the interbank rate: a difference invisible on the receipt but identifiable in the card feed with the right tools. Navan Expense records the transaction currency alongside the settled home-currency amount, making DCC charges visible in the expense feed rather than buried in the converted total.

How corporate card policy shapes FX costs

The type of corporate card a company issues determines the baseline FX cost structure. Cards with no foreign transaction fees pass only the card network's own markup, typically 0.6-1.0% for Visa and Mastercard, rather than adding an issuer surcharge on top. Companies that issue cards with 3% foreign transaction fees pay a compounding premium on every international transaction.

Travel policy should address foreign currency exchange directly. Guidance on card usage abroad, DCC opt-out behavior, and local-currency payment instructions helps travelers avoid avoidable charges without needing to understand the underlying FX mechanics. Navan's real-time policy engine surfaces this guidance at the point of booking and at card swipe, making the right behavior the default rather than a pre-departure instruction that travelers miss.

Best practices for managing FX costs on business trips

Clear FX policy prevents expense rework and budget surprises. Finance teams can embed currency-specific guidance directly into travel policy so travelers encounter it before departure rather than at the checkout terminal abroad.

• Always pay in local currency: Declining DCC at every international merchant checkout keeps conversion costs in the card network's rate band rather than the merchant's inflated markup.
• Specify which card to use abroad: Policy should name the preferred card for international travel. Cards with no foreign transaction fees eliminate the issuer surcharge on every purchase.
• Require local-currency amounts on receipts: Travelers should capture receipt amounts in the transaction currency, not just the converted home-currency total. The original currency amount is what reconciliation tools need for accurate reporting.
• Audit DCC charges regularly: International card statements can show DCC transactions without clear labels. Finance teams can identify them by finding transactions that settled in the cardholder's home currency at a foreign merchant.
• Brief travelers before departure: A specific pre-trip instruction about declining DCC reduces the probability that travelers accept the offer when it appears on a screen in a foreign language at the end of a long travel day.

This overview of travel expense reporting covers the documentation standards finance teams use when processing multi-currency expense submissions during close.

When to consider alternatives to card-based FX exchange

Corporate cards handle most international travel spend efficiently. For larger, recurring foreign currency needs, alternatives may reduce costs meaningfully.

International wire transfers are standard for supplier payments and contractor invoices, but most banks mark up the exchange rate 2-4% above the interbank rate. On a $100,000 wire, that premium ranges from $2,000 to $4,000 above what specialist FX providers typically charge. Companies with frequent international wire volume often find dedicated treasury FX tools more cost-effective for large transfers.

Prepaid travel cards let employees load the destination currency at a known rate before departure. They cap surprise charges but require accurate spend forecasting, making them more practical for extended international assignments than short business trips.

Treasury hedging instruments such as forwards, options, and currency swaps protect companies with predictable, large foreign currency obligations against rate movements. These instruments sit outside most travel teams' scope but directly affect the budget available for international programs. Finance teams setting per diem allowances in multiple currencies should coordinate with treasury in volatile markets to keep daily rates meaningful as exchange rates shift.

For most corporate travel programs, the highest-return actions are choosing cards with low or no foreign transaction fees, training travelers to decline DCC, and using automated expense tools to reconcile multi-currency transactions without manual conversion work.

Related terms

• Reconciliation: The process of matching expense records to card statements. Foreign currency transactions add complexity because the settlement rate often differs slightly from the rate at purchase date, requiring tools that capture both figures accurately.
• Bleisure travel: Business trips extended with personal leisure days. When blended trips span multiple countries, foreign currency exchange affects both the reimbursable business costs and the personal out-of-pocket spend travelers need to separate.
• Compliance: Policy enforcement covering acceptable expense types and documentation standards. FX-specific rules on card selection, DCC opt-out behavior, and foreign-currency receipt documentation protect companies from avoidable costs and audit exposure.
• Duty of care: The employer's obligation to protect employees during business trips. International duty-of-care programs track traveler whereabouts across currency zones, where FX data also helps finance understand the geographic spread of travel spend.

Sources

[1] Bank for International Settlements, "Global FX trading hits $9.6 trillion per day in April 2025," BIS Triennial Central Bank Survey, September 2025, https://www.bis.org/press/p250930.htm

[2] Chase Business, "What to know about business credit cards and foreign transaction fees," https://www.chase.com/content/chase-ux/en/personal/credit-cards/education/basics/business-credit-cards-without-foreign-transaction-fees

[3] MillTech, "North America Corporate CFO FX Report 2025," https://investments.millenniumglobal.com/resources/currency-insight-and-education/the-milltech-north-america-corporate-cfo-fx-report-2025

Managing foreign currency exchange well is a detail-level advantage for global travel programs. See how Navan manages international spend.