Currencies are traded in pairs and exchanged one
against the other
when traded, the rate at which they are exchanged is called
the exchange
rate. The majority of currencies are traded against the US
dollar (USD),
which is traded more than any other currency. The four currencies
traded most
frequently after the US dollar are the euro (EUR), the
Japanese yen (JPY), the
British pound sterling (GBP) and the Swiss franc (CHF).
These five currencies
make up the majority of the market and are called the major
currencies or
“the Majors”. Some sources also include the Australian
dollar (AUD) within the
group of major currencies.
The first currency in the exchange pair is referred to as
the base currency.
The second currency is the counter currency or quote
currency.
The counter
or quote currency is thus the numerator in the ratio, and
the base currency is
the denominator.
The exchange rate tells a buyer how much of the counter or
quote currency
must be paid to obtain one unit of the base currency.
The
exchange rate also
tells a seller how much is received in the counter or quote
currency when
selling one unit of the base currency.
For example, an
exchange rate for
EUR/USD of 1.5083 specifies to the buyer of euros that
1.5083 USD must be
paid to obtain 1 euro.
0 comments :
Post a Comment