A list of foreign exchange rates is a familiar site to travelers and anyone who engages in international travel. The rate at which one country's currency can be exchanged for another changes, at least in small ways, on an hourly basis. Why exchange rates fluctuate, what currencies are applicable, and where to do these exchanges are all relevant to travelers going to Europe.
The foreign exchange rate is set in most cases by activity on the foreign exchange market (FOREX or "currency market"). This market can only exist because of the prevalence of fiat currency. Unlike money that is made out of or backed by precious metals, fiat currency only has value because the issuing government says that it does. While there are some examples where the exchange rate is set by government order, and the currency is not allowed to "float" on the open market, none of these countries are European.
Despite the way fiat currency is supposed to work in theory, in actual practice a currency's value is never derived solely on the basis of what a government says it should be. Money is worth more than the paper it is printed on because the government says so, but past that what it is actually worth is based on other factors. It is a mixture of what a government says it should be, what that government's fiscal policies are, the health of the country's economy and what people think the value of the currency should be. The latter gives rise to the practice of trading currency as if it were a commodity, and thus the foreign exchange or currency market.
So, for example, if a government is running a high, systemic deficit; has a weak economy; and is suffering a string of financial scandals, it will fall in value towards what the actors on the market perceive its real value to be. State banks, private banks, and corporations will start selling that currency for more valuable or stable currencies, and speculators will begin betting against it. The result is a dumping of the undesired currency, and a scramble to buy up other forms of money. This is exactly what happened when the U.S. dollar went into a record, downward spiral against the euro, pound sterling, and yen in 2007 and 2008.
The principal currency in Europe is the European Currency Unit, or "Euro." This is the common currency of those European countries that have joined together into the "Eurozone." These countries are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. Some European countries that have not converted to the euro include Great Britain (the pound sterling), Switzerland (Swiss franc), and Sweden (krona).
Currency exchange booths are a common sight in Europe, and are often found at airports, train stations, and pretty much anywhere lots of tourists congregate. They are much more common in Europe than is the case in the United States. They can be identified by the multi-language signs that declare "exchange-cambio-geldwechsel." They also charge a commission for their service. Even in Eurozone countries, the laws governing commissions vary, and different companies will offer different rates. There are no hard and fast rules regarding using an exchange booth, past asking what the commission is and checking a travel guide for what a fair commission is in the country you are visiting: what is fair in France might not be in Poland.
Most American ATM cards can withdraw money from European ATMs. Doing so now typically requires that you notify your bank that you will be in a foreign country. The exchange rate that your bank offers may or may not be competitive with that of the exchange booth (say $1.40 to 1 Euro instead of $1.38), but on the plus side they typically only charge a modest foreign ATM use fee instead of a commission. Once again, these terms will vary with what bank you are using, but the ATM offers a convenient substitute for the exchange booth.
