forex basics

What is Base Currency and Quote Currency in Forex Trading?

When you first go and see a forex chart or the market watchlist section on the chart, you see a quote that consists of two currencies. That is because in forex market currencies are traded in pairs.

When you buy one currency, you automatically sell another currency. Like if you open a buy position on EURUSD, it means you are buying euro and selling dollars.

In this blogpost we will discuss everything about the Base and Quote currencies in the currency pairs.

Base Currency and Quote currency

The first currency in the pair is called the base currency, while the second currency is called the quote or counter currency. 

For example, In EURUSD, The first currency is euro so it is the base currency and the second currency which is USD is the quote currency.

Let us take another example, 

In USDJPY, the first currency is the base currency which is USD and JPY is the quote currency.

Every currency pair has its quoted value, and this value is given right in front of the symbol of a currency pair and that value denotes the exchange rate of the currency.

For example, the current quoted value of EURUSD is 1.0853.So this value tells the amount of quote currency it takes to the equal base currency.

In this case, it tells that it will take 1.0853 USD to equal 1 EUR. Which is the current exchange rate of EURUSD.

In the same way, the current quote for USDJPY is 107.76 This means that it will take around 107.76 Japnese yen to buy 1 us dollar which is the current exchange rate of USDJPY.

Now, in most of the currency pairs, the base currency is higher in value than the quote currency, like EURUSD, GBPUSD, GBPJPY, etc, and this is because, it easy for us to use in this way.

But there some pairs in which the base currency is lower in value than the quote currency, like AUDUSD, CADCHF, and many others.

For example, if you look at the pair AUDUSD,

In this pair, the base currency is the Australian dollar(AUD) and the quote currency is the US dollar(USD) and this pair is quoted as AUD/USD 0.649i, meaning that it will take only 0.6491 USD to buy 1 Australian dollar.


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