infinance, the exchange rates (also known as the foreign-exchange rate, Forex rate or FX rate) between two currencies specifies how much one currency is worth in terms of the other.for example an exchange rate of 1 ) to the United States dollar (USD, $) means that JPY 12 is worth the same as USD 1.the foreign exchange market is one of the largest markets in the world.by some estimates. About 2 trillion USD worth of currency changes hands every day.
the spot exchange rate refers to the current exchange rate.the forrent E refers to an exchange rate that is quoted and traded today but for delivery and payment on a specific future date.
quotations < p O tation is given by stating the number of units of "term currency" or "price currency" that can be bought in terms of 1 unit currency " Currency). for example, in a quotation that says the eurusd exchange rate is 1.3 (1.3 USD per EUR), The term currency is USD and the base currency is EUR.
there is a market convention that determines which is the base currency and which is Currency. In most parts of the world, The orderis:
EUR-GBP-aud-USD-* * * (where * * * is any other currency).
thus if YY EUR is the base currency, Aud is the term currency and the exchange rate tells you how many Australia n dollars you would pay or receive for 1 euro.cyprus and Malta which were Quoted as the base to the USD and *** Were recently removed from this list when they joined the euro.in some areas of Europe and in the non-professional market in the uk, Eur and GBP are reversed so that GBP is quoted as the base currency to the euro.in order to determine which is the base currency where both cur rencie S are not listed (i.e. both are ***), Market convention is to use the base currency which gives an exchange rate greater than 1.. this avoids rounding issues and exchange rates beis Oted to more than 4 decimal places.there are some exceptions to this rule e.g. the Japanese often quote their currency as the base to othees ..
quotes using a country's home currency as the price currency (e.g. ， Eur 1. = $1.45 in the us) are known as direct quotation or price quotation (from that country's perspective) ([1]) And are used by most countries ..
quotes using a country's home currency as the unit currency (e.g.,? .4762 = $1. in the us) are known as indirect quotation or quantity quotation and are used in British newspapers and are also common in ause New Zealand and the eurozone.
direct quotation: 1 foreign currency unit = x home currency units
indirect quotation Ign currency units
note that, using direct quotation, if the home currency is strengthening (i.e., appreciation Or becoming more valuable) then the exchange rate number decreases.conversely if the foreign currency is strengthening, The exchange rate number increases and the home currency is depreciating.
when looking at a currency pair such as eurusd, The first component (EUR in this case) will be called the base currency.the second is called the term currency.for example: euur Means EUR is the base and USD the term, So1eur = 1.33866 USD.
currency pairs are often incorrectly quoted with a "/"(forward slash). in fact if the slash The order of the currencies should be reversed.this gives the exchange rate.e.g. if eu R1 is worth USD 1.35, Euro is the base currency and dollar is the term currency so the exchange rate is stated eurusd or USD/ Eur.to get the exchange rate divide the USD amount by the euro amount e.g.1.35/ 1. = 1.35
market convention from the early 198s to 26 was that most currency pairs were quoted to 4 decimal places for spot transans To 6 decimal places for forward outrights or swaps. (the fourth decimal place is usually referred to as a "pip.") An exception to this was exchange rates with a value of less than 1. which were usually quoted to 5 or 6 decimal places.although there is no fixed 규칙, Exchange rates with a value greater than around 2 were usually quoted to 3 decimal places and currencies with a value greater than 8 were quoted to 2 decimalplaces.currencies over 5 were usually quoted with no decimal places (e. g. the former Turkish lira) . e.g. (GBP OMR: .765432-eurusd: 1.3386-GBP bef: 58.234-EUR JPY: 165.29). in otherwords, Quotes are given with 5 digits.where rates are below 1, Quotes frequently include 5 decimal places.
in 26 Barclays capital broke with convention by offering spot exchange rates with 5 or 6 S. the contraction of spreads (the difference between the bid and offer rates) Arguably necessitated finer pricing and gave the banks the ability to try and win transaction on multibank trading platforms where all banks may othees