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In this video tutorial, the process of converting currency using the exchange rate is explained. The example involves John, who wants to convert 15,000 US dollars into Euros, with the exchange rate being 1 US dollar equal to 0.9 Euros. To determine how many Euros John will receive, the method involves placing the amount in US dollars in the numerator of a fraction and the exchange rate in the denominator. This setup ensures that the US dollar units will cancel, leaving the desired unit of Euros. The key is to position the units correctly in the fractions to achieve the correct conversion.