What are currency quotes?

In the field of finance, the currency quote (also known as the exchange rate) is the value of one particular currency relative to the other. For example, 91 Japanese yen can be exchanged for one US dollar, and this means that their quotation is 91: 1. This value is determined in the Forex market, which operates 24 hours a day, excluding weekends.

Thus, speaking of what such quotes are, you can define them as the ratio of one currency to another in their pair. In this case, the currency used as the reference currency is called the quote currency, and the second is the transaction currency.

Such currency pairs are sometimes written by concatenating ISO codes (ISO 4217), separated by a slash. The most widely traded currency pair is the ratio of the euro to the US dollar, denoted as EUR / USD. An example of what such quotes are, thus, is the ratio EUR / USD. In this example, the euro is the base currency, USD is the counter currency.

Quotations of currencies have generally accepted abbreviations provided by the International Organization for Standardization (known as ISO). By virtue of the ISO 4217 standard, the main currency currencies and their values are indicated as follows: USD, GBP, EUR, AUD, JPY, CAD, And finally the Swiss franc (CHF).

The quote, denoted by EUR / USD 1.2500, indicates that one euro is exchanged for $ 1.25 million. If it changes, for example, from 1.2500 to 1.2510, the euro's exchange rate will increase its relative value. In turn, this means that the dollar has weakened and the euro strengthened. On the other hand, if the EUR / USD ratio changes from 1.2500 to 1.2490 - then the euro becomes relatively weaker than the dollar.

When speaking about quotes, one should remember the rules set by the European Central Bank. According to its requirements, in the currency pair the euro has a priority. Thus, all couples with his participation should apply it as their base, indicated in the beginning. For example, the US dollar exchange rate is defined as EUR / USD.

However, in some regions, monetary units may change places or not have an exact designation. In order to determine what is the base currency in such a pair, a unit that has an exchange rate of more than 1000 is used as a basis. This avoids rounding problems - the exchange rates are quoted with more than 4 decimal places. There are some exceptions to this rule, for example, Japan often quotes its currency as a base to others. Speaking of what is quotation, it should be noted that the display of the value of the currency as a base is used in most countries of the world and is called a direct quote. The mapping of such a relationship in reverse sequence is called an indirect quote and is common in Australia, New Zealand and some countries of the Eurozone. So, the indication of USD 1.35991 = 1.00 EUR does not reflect the value of the dollar quotation, but the value of the euro.

Using direct quotation, an increase in the base currency indicator indicates its strengthening and value increase quoted. In other words, the growth of the exchange rate signifies an increase in the value of a particular currency unit