What Is a Quote Currency?

In foreign exchange (Forex), the quote currency, also known as the counter currency, is the second currency in both a direct and indirect 澳洲幸运5官方开奖结果体彩网:currency pair. The quote currency is used to determine the value of the base currency. The quote currency is listed after the base currency in the pair when currency exchange 𓃲rates are quoted.

Trading Currencies

Understanding the quotation and pricing structure of currencies is essential for investors who want to trade currencies in the forex market. Market makers tend to trade specific currency pairs directly or indirectly. In a 澳洲幸运5官方开奖结果体彩网:direct quote, the quote currency is the foreign currency. In an 澳洲幸运5官方开奖结果体彩网:indirect quote, the quote currency is the domestic currency.

Investors can determine how much of the quote currency they need to sell to purchase one unit of the first or 澳洲幸运5官方开奖结果体彩网:base currency. As the rate in a currency pair increases, the value of the quote currency falls, whether the pair is direct or indirect. Most U.S. dollar (USD) pairs hold the USD as the base currency. If the USD is not the base, it is a 澳洲幸运5官方开奖结果体彩网:reciprocal currency.

Example

Let's assume a trader wants to purchase £400 using U.S. dollars. This would involve a trade using the GBP/USD currency pair. To execute the trade, they need to figure out how many USD (the quote currency) they need to sell to get £400.

If the exchange rate for the pair at the end of the trading day is 1.4103, it costs the trader $1.4103 to purchase £1. To complete the transaction on that day, the trader has to sell 564.12 units of the quote currency to get 400 units of the base currency or $564.12 for £400 = (400 x 1.4103).

Cross Rate

Most currency exchange rates are quoted against the U.S. Dollar, the world's reserve currency. 澳洲幸运5官方开奖结果体彩网:Cross rates are used when traders or investors want to exchange one foreign currency directly for another foreign c🍷urrency without converting it to USD first.

The cross rate between the U.S. dollar and Canadian dollar is denoted as USD/CAD and is a di𓆉rect quote. This means that the CAD is the quote currency, while the USD is the base currency. The CAD is used as a reference to determine the value of one USD. ✅From a U.S.-centric point of view, the CAD is a foreign currency.

On the other hand, the EUR/USD denotes the cross rate between the euro and the U.S. dollar and is an indirect quote. This means that the EUR ꦐis the base currency, and the USD is the quote currency. Here, the USD is the domestic currency and determines the value of one EUR.

Currency Pairs

Currency pairs—both base and quote currencies—are affected by several factors, including economic activity, the monetary and fiscal policy enacted by 澳洲幸运5官方开奖结果体彩网:central banks, and 澳洲幸运5官方开奖结果体彩网:interest rates. Major currencies, such as the euro and the USD, are more l🅷ikely to be the base currency than the quote currency in a currency pair, especially whe💮n trading in exotic currencies.

The most commonly traded currency pairs in 2023 were:

• EUR/USD (Euro/US Dollar)
• USD/JPY (US Dollar/Japanese Yen)
• GBP/USD (British Pound/US Dollar)
• AUD/USD (Australian Dollar/US Dollar)
• USD/CAD (US Dollar/Canadian Dollar)
• USD/CNY (US Dollar/Chinese Yuan)
• USD/CHF (US Dollar/Swiss Franc)
• EUR/JPY (Euro/Japanese Yen)
• EUR/GBP (Euro/British Pound)
• NZD/USD (New Zealand Dollar/US Dollar)

The first currency in these pairings is the base currency, while the second is the quote cur💯rency. In the GBP/USD pairing, the pound is the base currency or the one purchased, while the dollar is the quote currency and the one being sold.

The Bottom Line

Currencies are exchanged on the FOREX. The quote currency is the second currency in both a direct and indirect currency pair and is used to value the base currency. An example of a currency pair is EUR/USD, the most traded pair. Currency quotes sh𓄧ow investors how many units of the quote currency they will need to exchange for one unit of the base currency.