FX Quotation

Key words: FX quote style,base currency, domestic currency, direct and indirect quotes, spot and forward markets
Deutsche Bank

Unlike stock market, there is no natural numeraire currency in FX market. Those who are new to FX market can be simply confused by quotation styles.

For euro quoted against the US dollars, the FX quote would look EUR/USD = 1.3500, where EUR/USD is a name of a currency pair. It is quoted like CCY1CCY2.
CCY1 is referred as a foreign/base currency while CCY2 is a domestic a.k.a. terms/quote currency.
Therefore the spot rate 1.3500 is simply the number of units of CCY2 required to buy one unit of CCY1, $1.35 paid for 1 euro.
The value of the base currency is always 1.

It is natural to think about own national currency and its relation to another foreign currency so the value of the first one is reflected through the value of the foreign. Depending on currency quote there are two ways to quote a currency pair. A direct currency quote is simply a currency pair in which the domestic currency is the base currency. Indirect quote is a currency pair where the domestic currency is the quoted currency.

In the forex spot market, most currencies are traded against the US dollar, and the US dollar is frequently the base currency in the currency pair. Counterexample is precious metals that are quoted in the same way as FX pairs. For example, XAG/USD shows how much USD is paid for XAG.

Spot market styles can be written in the following hierarchy most of the time:

Precious Metals -> EUR -> GBP -> AUD -> NZD -> USD -> CAD ->CHF ->JPY

As it’s shown, precious metals are always CCY1 currency. If we have CHF and NZD, we write NZD/CHF instead of CHF/NZD on the spot market. Also, we see that CCY1 and CCY2 do not have the US dollar. Therefore such currency pair is called cross currency.

In the forward markets pricing is done in terms of how many US dollars are needed to buy one unit of the other currency. This is a European style quotation. When taking USD/CHF = 1.1000 spot price, in the forward market it will look CHF/USD = 0.9090 (1/1.1000).

For the most important currency pairs there are names as a short cut:


EUR/USD = Euro or Fibre
GBP/USD = Cable.
FX prices used to be transmitted over a cable between London and New York.

GBP/JPY = Geppy
AUD/USD = Aussie
NZD/USD = Kiwi
USD/CAD = Loonie
USD/CHF = Swissy or the Cross
USD/JPY = Gopher
EUR/SEK = Euro stockie


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4 thoughts on “FX Quotation

  1. I didnt understand this particular line. \”When taking USD/CHF = 1.1000 spot price, in the forward market it will look CHF/USD = 0.9090 (1/1.1000)\”

  2. Hey Joe,

    Never had Fiber before but seems you are correct.

    I found these explanations:

    1. The “paper” used for Euro banknotes is in fact 100% pure cotton “fibre”, which improves their durability as well as imparting a distinctive feel.

    2. An “upgrade” on the old telecommunications cable that connects the UK and US, to a much newer fiber cable.

    Thanks a lot!