Understanding a Quote
Whenever a currency is quoted it is done in relation to another.
It means that the value of one is quoted in the value of other. For example, a
currency quote for US Dollar (USD) and Indian rupee (INR) would look like this:
USD/INR=58.35
This quote is also known as a currency pair. The currency of the left of the forward slash is the base currency and is always equal to one unit. The currency on the right of the forward slash is the quote or counter currency and its value equivalent to the value of one unit of the base currency. In the example above, the quote says that for one US Dollar you can get 58.35 Indian Rupee.
This quote is also known as a currency pair. The currency of the left of the forward slash is the base currency and is always equal to one unit. The currency on the right of the forward slash is the quote or counter currency and its value equivalent to the value of one unit of the base currency. In the example above, the quote says that for one US Dollar you can get 58.35 Indian Rupee.
A Forex quote is always quoting the currencies in their abbreviated form
Direct Currency Quote and Indirect Currency Quote
A currency pair can be quoted in two ways-
directly and indirectly. In a direct currency pair, the domestic currency pair
Is the base currency and it is just the opposite of the indirect currency quote.
For example, if USD is the domestic currency and you want a quote for Euro, a direct quote would be 0.77 USD/EUR, which means with one US Dollar, you can purchase .77 Euros. The indirect quote for this would be the inverse (1/0.77), which is 1.30 EUR/USD and means that for one Euro you can purchase 1.3 US Dollar.
Since, most of the times most currencies in a Forex market are
traded against U.S Dollar, USD is most frequently the base currency. However,
some currencies that have a historical tie with Britain such as the British
pound, Australian and New Zealand Dollar are all quoted with them as the base
currency against US Dollar.
Another interesting aspect to note about the quoting of currency is that, most exchange rates are quoted to four decimal places while the Japanese Yen (JPY) is quoted to only two decimal places.
Most currency exchange rates are quoted out to four digits after the decimal place, with the exception of the Japanese yen (JPY), which is quoted out to two decimal places.
Another interesting aspect to note about the quoting of currency is that, most exchange rates are quoted to four decimal places while the Japanese Yen (JPY) is quoted to only two decimal places.
Most currency exchange rates are quoted out to four digits after the decimal place, with the exception of the Japanese yen (JPY), which is quoted out to two decimal places.
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