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In this video tutorial, the presenter explains how to convert currency using the exchange rate. The example involves John, who wants to convert 15,000 US dollars into Euros, with the exchange rate being 1 US dollar to 0.9 Euros. The conversion process begins by placing the amount in US dollars in the numerator of a fraction. The goal is to set up a second fraction with the exchange rate, ensuring that the US dollar unit cancels out, leaving Euros as the remaining unit. To achieve this, the US dollar unit must be positioned in the denominator of the second fraction, allowing for the proper cancellation and conversion to Euros.