Understanding a Forex Quote

By: Hugo McDougall in Forex Consultant on Sep. 17, 2010

Further more, currencies are also expressed in direct and indirect term. In the example above we used a direct currency quote in which the domestic currency is always taken the as the base currency where as in an indirect quote, the domestic currency is the quoted currency. An example of indirect quote would be the reverse of the example explained above where Japanese Yen would be held as the base currency.

When you read the direct quote, the base currency would remain constant where as the foreign currency would remain variable where as in an indirect quote, the base currency would be variable where as the foreign currency would remain constant. When you enter the Forex spot market, you would notice that all currencies are compared and traded against the U.S. dollar this means that in most examples the U.S. dollar as held as the base while other currencies vary daily depending on the demand and supply of the currency.

However, there are some currencies which do not use the U.S. Dollar as the base price, for instance lets look at the Euro. It is often expressed as EUR/USD = 1.25. This means that for 1 Euro you can buy $1.25.

Similar Posts:

Share

Post comment