Quote Currency and Base Currency Detailed Overview

Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. For example, in the EUR/USD pair the US Dollar is the quote currency, while the first currency is referred to as the base currency. If the price of the pair is 1.1200, this means that then you need $1.12 to buy 1 Euro.

• The current price is determined by the market forces of supply and demand.
• Trading currency pairs is conducted in theforeign exchange market, also known as the forex market.
• If he expects the price to rise, he buys USD and can sell them again at a later date when the price has risen, thus making a profit.
• Mostly, widely used currencies like the USD, EUR, GBP, etc., are considered the counter currencies, except in cases where two countries with other currencies trade with each other.
• The quote for the currency pair shows how much of the quote currency it takes to purchase one unit of the other.
• Investopedia requires writers to use primary sources to support their work.

Ultimately, though, which one is which doesn’t really matter – all that matters is that you’re using a strong base currency to buy or sell a weaker one. Currency pairs—both base and quote currencies—are affected by a number of different factors. Some of these include economic activity, the monetary and fiscal policy enacted bycentral banks, andinterest rates. In forex, the base currency represents how much of the quote currency is needed for you to get one unit of the base currency. For example, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. dollar would be the quote currency. There are as many currency pairs as there are currencies in the world.

What Is a Counter Currency?

If the exchange rate changes to the company’s disadvantage, the frozen exchange rate still applies thanks to the hedging contract, so the company does not incur a loss. Samples of these formats are GBP/AUD, EUR/USD, USD/JPY, GBPJPY, EURNZD, and EURCHF. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar). If you’re selling the pair, then you’re selling the base currency, and the currency you’re buying is the quote currency. While in buying, you’re selling the quoted currency to buy the base currency.

The total number of currency pairs that exist changes as currencies come and go. All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. The quote currency is basically the second currency listed in a currency pair and is used to define the value of the base currency.

What are base currency and quote currency used for?

Therefore, understanding howquote currencies work is crucial for anyone doing business or travelling in a foreign country. AximTrade is the fastest-growing brokerage in the global markets with a highly advanced technology and Copy trade platform. Explore the diversity of forex currency pairs, and the best trading conditions with AximTrade.

For base currency and quote currencying purposes, a firm may use the base currency as the domestic currency or accounting currency to represent all profits and losses. Trading currency pairs is conducted in theforeign exchange market, also known as the forex market. This market allows for the buying, selling, exchanging, and speculation of currencies. It also enables the conversion of currencies for international trade and investment. The forex market is open 24 hours a day, five days a week , and sees a huge amount of trading volume.

The quote currency is the second listed currency in a currency pair and it is usually the foreign currency. Base currency is also known as the primary currency, while quote currency is also known as the secondary or counter currency. Base currencies are usually more stable than their counterparts, which can make them more appealing to investors.

What is a Base Currency and what is a Quote Currency

The first currency is called the base currency and the second currency is called the quote currency. So for example, EURUSD, means that the base currency is the Euro and the quote currency is the USD. The quote currency is sometimes referred to as the counter currency. It is possible to treat a currency pair as a single entity and apply buying and selling operations to it as a whole. For example, if a trader purchases the BTC/USD currency pair, they receive the base currency, BTC, in exchange for the quote currency, USD.

The current price is determined by the market forces of supply and demand. Changes to either supply or demand make the current price rise or fall. The ask price is the price that the trader is willing to receive from selling the traded asset. For instance, if a trader wants to sell a currency pair, then the ask price is the price he will get. The ask price represents the lowest price that a trader is willing to sell the traded asset for. Top major currencies, like the US Dollar, are more likely to be the base currency, especially in the exotic pairs.

The quote currency is listed after the base currency in the pair when currency exchange rates are quoted. One can determine how much of the quote currency they need to sell in order to purchase one unit of the first orbase currency. In the forex market, currency unit prices are quoted as currency pairs.

In the forex market, traders determine how much of the counter currency is required to buy one unit of the first or base currency. Traders and investors should understand how currency pairs are structured in order to understand forex trading. The first or base currency is equivalent to one monetary unit, such as one dollar or one euro. Buying one euro in a EUR/USD currency pair means they receive a single euro by selling a certain number of U.S. dollars. A quote currency is the second currency quoted in a foreign exchange rate. The quote currency is so named because it is the value of one unit of the quote currency in terms of the base currency.

In a currency pair, the first one is the base currency, and the second one is the quote currency. The base currency is taken as one, and its value relative to the quote or counter currency is determined. It is possible to find how many units of counter currency can be exchanged for a unit of the base currency. On the contrary, in an indirect quote currency, the foreign currency is the base, and the domestic currency is the counter currency.

Base Currency vs Quote Currency

For convenience, the direct base currency is always taken as one unit. In the example above, the Chinese exporter will estimate the value of 1 CNY in terms of UYU. This is a direct quote, where the domestic money is the base, and the foreign money is the counter. When more quote currency can be bought using one unit of the base currency, it is called currency appreciation. If you were to open a short position, you would do so with an expectation that the base currency will fall in value against the quote currency.

ISO currency codes are three-letter alphabetic codes that represent the various currencies used globally. Ariel Courage is an experienced editor, researcher, and former fact-checker. She has performed editing and fact-checking work for several leading finance publications, including The Motley Fool and Passport to Wall Street.

Trade Top Forex Pairs Now

From a U.S.-centric point of view, the CAD is the foreign currency. A currency pair’s exchange rate reflects how much of the quote currency is needed to be sold/bought to buy/sell one unit of the base currency. As the rate in a currency pair increases, the value of the quote currency is falling, whether the pair is direct or indirect. A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. Explore the best trading conditions and diversity of Currency pairs with AximTrade.

Generally speaking, the forex market is open 5 days per week, 24 hours a day. The term counter currency refers to the reference or second currency in a currency pair. Counter and base currencies are part of the currency or foreign exchange market. A trader or investors can determine how much of the counter currency they need to sell in order to purchase one unit of the first or base currency. The counter currency is listed after the base currency in the pair when currency traders examine ISO currency codes. The base currency and quote currency in Forex are used to arrive at the exchange rates.

A currency pair is the quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency of a currency pair is called thebase currency, and the second currency is called thequote currency. Understanding the pricing and quotation for currency pairs is very essential in forex trading. Currency pairs are affected by different fundamental and technical factors that affect the exchange rate.

When a country’s central bank intervenes in the market to buy or sell its currency, this can help to stabilize the base currency. Quote currencies, on the other hand, are often more volatile due to political and economic factors. These factors can include things like wars, natural disasters, and changes in government. As a result, quote currencies can be more risky for investors but they can also offer more opportunities for profit. In a direct quote, the quote currency is the foreign currency, while in an indirect quote, the quote currency is the domestic currency.

If you are looking for liquidity, then base currency may be a better choice. Ultimately, it is up to you to decide which is best for your individual needs. Nonetheless, when trading currencies, investors are selling one currency in order to buy another. It now wants to invest in its expansion there and purchase a warehouse. The warehouse currently costs $100,000, so the company looks at the USD/GBP currency pair to see how many British pounds sterling it needs to allocate to this investment.

• This market allows for the buying, selling, exchanging, and speculation of currencies.
• From a U.S.-centric point of view, the CAD is the foreign currency.
• The forex market is open 24 hours a day, five days a week , and sees a huge amount of trading volume.
• INVESTMENT BANKING RESOURCESLearn the foundation of Investment banking, financial modeling, valuations and more.
• The quote currency is the currency being used to pay for the transaction, and it is also known as the counter currency or secondary currency.

Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Investopedia does not include all offers available in the marketplace. The mixed sentiment comes as the gold market looks to end the week holding critical support above $2,000 an ounce but solidly down from its test of all-time highs above $2,080 an ounce.

Conversely, when a market participant decides to sell the BTC/USD currency pair, they obtain USD in return for a specified amount of Bitcoin. A currency pair is the quotation of the relative value of one currency against the other. In currency pairs the asset serving as reference is called the “quote currency” and currency that is being quoted is called the “base currency”. For instance, the EUR/USD currency pair has the euro as its base currency and the US dollar as its quote currency.

In this case, the USD is the base currency, and RUB is the counter currency. Usually, many countries use widely accepted currencies, like USD, EUR, etc., to denote the value of a base currency. For instance, an investor from Korea wants to know the value of the Japanese Yen . So he can quote it against the South Korean Won or the USD to estimate JPY value. The euro was introduced as an accounting currency in 1999 and is the second most active currency behind the U.S. dollar. USD has appreciated by 1 INR, this means now you have to pay more for purchasing 1 unit of the base currency.