In the foreign exchange market, a currency pair is the quotation of the relative value of a currency unit against the unit of another currency. The quotation EUR/USD 1.3225 means that 1 Euro will buy 1.3225 US dollars. In other words, this is the price of a unit of Euro in US dollars. Here, EUR is called the "Fixed currency", while USD is called the "Variable currency" There is a market convention that determines which is the fixed currency and which is the variable currency. In most parts of the world, the order is: EUR – GBP – AUD – NZD – USD – others.  Accordingly, in a conversion from EUR to AUD, EUR is the fixed currency, AUD is the variable currency and the exchange rate indicates how many Australian dollars would be paid or received for 1 Euro. Cyprus and Malta, which were quoted as the base to the USD and others, were recently removed from this list when they joined the Eurozone. In some areas of Europe and in the retail market in the United Kingdom, EUR and GBP are reversed so that GBP is quoted as the fixed currency to the euro. In order to determine which is the fixed currency when neither currency is on the above list (i.e. both are "other"), market convention is to use the fixed currency which gives an exchange rate greater than 1.000. This reduces rounding issues and the need to use excessive numbers of decimal places. There are some exceptions to this rule: for example, the Japanese often quote their currency as the base to other currencies. Quotation using a country's home currency as the price currency (for example, EUR 0.8989 = USD 1.00 in the Eurozone) is known as direct quotation or price quotation (from that country's perspective) and is used in most countries. Quotation using a country's home currency as the unit currency (for example, USD 1.11 = EUR 1.00 in the Eurozone) is known as indirect quotation or quantity quotation and is used in British newspapers; it is also common in Australia, New Zealand and the Eurozone. Using direct quotation, if the home currency is strengthening (that is, appreciating, or becoming more valuable) then the exchange rate number decreases. Conversely, if the foreign currency is strengthening and the home currency is depreciating, the exchange rate number increases. Market convention from the early 1980s to 2006 was that most currency pairs were quoted to four decimal places for spot transactions and up to six 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 1.000 which were usually quoted to five or six decimal places. Although there is no fixed rule, exchange rates numerically greater than around 20 were usually quoted to three decimal places and exchange rates greater than 80 were quoted to two decimal places. Currencies over 5000 were usually quoted with no decimal places (for example, the former Turkish Lira). e.g. (GBPOMR : 0.765432 - : 1.4436 - EURJPY: 165.29). In other words, quotes are given with five digits. Where rates are below 1, quotes frequently include five decimal places. In 2005, Barclays Capital broke with convention by quoting spot exchange rates with five or six decimal places on their electronic dealing platform. The contraction of spreads (the difference between the bid and ask rates) arguably necessitated finer pricing and gave the banks the ability to try and win transactions on multibank trading platforms where all banks may otherwise have been quoting the same price. A number of other banks have now followed this system.

Quotations

Main article: Currency pair

A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency, quote currency or currency and the currency that is quoted in relation is called the base currency or transaction currency. Currency pairs are sometimes then written by concatenating the ISO currency codes (ISO 4217) of the base currency and the counter currency, separating them with a slash character. Often the slash character is omitted, alternatively the slash may be replaced by and etc. A widely traded currency pair is the relation of the euro against the US dollar, designated as EUR/USD. The quotation EUR/USD 1.2500 means that one euro is exchanged for 1.2500 US dollars. Here, EUR is the base currency and USD is the quote currency(counter currency). This means that 1 Euro can be exchangeable to 1.25 US Dollars. The most traded currency pairs in the world are called the Majors. They involve the currencies euro, US dollar, Japanese yen, pound sterling, Australian dollar, Canadian dollar, and the Swiss franc.

Currency pair

FROM Wikipedia

TakeTheProfits.com
Copyright TakeTheProfits.com 2016 - 2018
Open Account Open Account Login Login More Exchange rate    Trading Account