The quote currency

In forex markets, traders always talks about the ‘quote currency’ in their daily trading activity. The quote currency (or counter currency) is the second currency readable in a currency pair. From a practical point of view, it is used to calculate the value of the base currency (or transaction currency), which is instead the first currency readable in a currency pair. In daily trading activities, currency unit prices are quoted as currency pairs.
Currency pairs are written as AAA/BBB or AAABBB. AAA is the base currency and BBB is the quote currency. The abbreviations used for currencies are prescribed by the International Organization for Standardization (ISO) and the currency codes are provided in standard ISO 4217. Currency pairs must use these three letter-codes to identify a particular currency. The two currencies of a currency pair are sometimes separated with a slash character, although this is not mandatory.

Let’s make a concrete example. In the GBP/USD currency pair, the pound sterling is the base currency and the U.S. dollar the quote currency. A currency pair’s exchange rate says how much of the quote currency is needed to buy (or sell) one unit of the base currency. The higher the rate in a currency pair, the lower the value of the quote currency.

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