In this section, we’ll go over currency quotations and how they work in currency pair trades. When a currency is quoted, it is done in relation to another currency, so that the value of one is reflected through the value of another. Therefore, if you are trying to determine the exchange rate between the U. This is referred to as a currency pair. The currency to the left of the slash is the base currency, while the currency on the right is called the quote or counter currency. There are two ways to quote a currency pair, either directly or indirectly. So if you were looking at the Canadian dollar as the domestic currency and U.
For example, if Canada is the domestic currency, a direct quote would be 1. In the forex spot market, most currencies are traded against the U. In these cases, it is called a direct quote. However, not all currencies have the U. The Queen’s currencies – those currencies that historically have had a tie with Britain, such as the British pound, Australian Dollar and New Zealand dollar – are all quoted as the base currency against the U. The euro, which is relatively new, is quoted the same way as well. When a currency quote is given without the U.
Again, these are in relation to the base currency. Note that the bid price is always smaller than the ask price. According to the ask price, you can buy one U. However, in order to sell this currency pair, or sell the base currency in exchange for the quoted currency, you would look at the bid price.