DirectIndirect Quotes & BaseCounter Currency Pairs ... | direct quote currency
DirectandIndirectQuotesEverylocalcurrencycanbequoteddirectlyorindirectlyagainstothercurrencies(mostofthetimetheUSDollar):Directquotation:Amountoflocalcurrencythatisneededtobuyoneunitoftheforeigncurrency(mostcommonlytheUSD)IndirectQuotation:Amountoflocalcurrencythatistobereceivedwhenoneunitoftheforeigncurrencyissold.Ok,nowimagineyourlocalcurrencyistheEUR,inthiscasethequotationschemeagainsttheUSDollarwouldbe:DirectQuotation:USD/EUR–HowmanyEurostogetoneUSDollar,and,IndirectQuotation:EUR/USD–How...
Direct and Indirect QuotesEvery local currency can be quoted directly or indirectly against other currencies (most of the time the US Dollar):
Direct quotation:Amount of local currency that is needed to buy one unit of the foreign currency (most commonly the USD)
Indirect Quotation:Amount of local currency that is to be received when one unit of the foreign currency is sold.
Ok, now imagine your local currency is the EUR, in this case the quotation scheme against the US Dollar would be:
Direct Quotation: USD/EUR – How many Euros to get one US Dollar, and, Indirect Quotation: EUR/USD – How many US Dollars to get one Euro
For the sake of simplicity, most of the time the US Dollar is called the “Foreign Currency”, so for the majors we have the following:
Direct Currencies
USD/JPY USD/CAD USD/CHF
Indirect Currencies
EUR/USD GBP/USD AUD/USD
Counter and base (or quote) currencyThe f...