Quote Currency
Updated on July 18, 2023
The quote currency is the second currency listed in a currency pair. It is the currency in which the exchange rate is expressed, and its value is determined relative to the base currency. The quote currency is also known as the “secondary currency” or the “counter currency.”
For example, in the currency pair EUR/USD, the quote currency is the U.S. dollar (USD), while the base currency is the euro (EUR). In this case, the exchange rate indicates how many U.S. dollars are needed to purchase one euro.
What are the key points to consider related to quote currency?
Exchange Rate Quotation – The quote currency represents the currency in which the exchange rate is expressed. It indicates the amount of the quote currency needed to acquire one unit of the base currency.
Value Determination – Changes in the exchange rate reflect the relative strength or weakness of the quote currency compared to the base currency, impacting its value.
Impact on Trading Strategies – The choice of the quote currency can influence trading strategies, affecting factors such as liquidity, market information, and trading costs.
Direct and Indirect Quotes – Quote currencies can be presented in direct or indirect quotes, depending on the location of the domestic currency in the pair.
Bid and Ask Prices – The bid price is the price at which traders sell the base currency, while the ask price is the price at which traders buy the base currency, and the quote currency is involved in the conversion between these prices.
