The “foreign exchange quote” is the “ratio” of two currencies.
Say “foreign exchange quotes” and people think of sets of “currency pairs”, such as “euro/dollar” or “dollar/yen”.
The reason is simply that when you buy or sell foreign exchange, you have to sell one currency at the same time you buy another.
The two currencies will not separate.
Reading quotes becomes very convenient as long as you have two basic knowledge points: 1. The front currency is the base currency, and the back currency is the settlement currency.
2. Base money is always measured in units of one.
In addition to the dollar, the base currency can also be (GBP), (AUD), or euro (EUR) and other currencies.
For example, GBP/USD1.7366 means that one pound is worth $1.7366.
In this case, a rise in the value of the dollar means a fall in the value of the dollar, since it would take more dollars to convert a pound than before.
In a word, the rise of exchange rate means the appreciation of base money, while the fall of exchange rate means the depreciation of base money.
For example: USD/JPY 120.01, in this set of quotes, the US dollar is the base currency.
Usd/JPY 120.01, meaning 1 USD equals 120.01 yen.
Whether you buy or sell, you are trading base money.
When the dollar is the base currency, if the exchange rate increases, it means that the dollar increases in value and relative to the other dollar.
If the USD/JPY we mentioned above rises from 120.01 to 123.01, it means that the USD can now be exchanged for more yen than before.
If a currency pair does not contain U.S. dollars, it is a cross-currency pair.
For example, euro/yen 127.95 means 1127.95 yen.
