- Base currency
foreign exchange markets, the base currency is the first currencyin a currency pair. The second currency is named the quote currency, counter currencyor terms currency. Exchange rates are quoted in per unit of the base currency. Note that FX market convention is the reverse of mathematical convention.
eurois the dominant base currency against all other global currencies. As a result all currency pairs traded against the euroare quoted per EUR 1. e.g. the USD - EUR exchange rate will be identified as EUR USDand quoted as US dollars per 1 euro (USD/EUR).
The currency hierarchy for the "majors" is as follows:
New Zealand Dollar
United States dollar
* Japanese Yen
Other currencies (the "minors") are generally quoted against one of the major currencies and their cross rates between each other are less well defined.
"Base currency" in foreign exchange can also mean the accounting currency or domestic currency. For example, a British bank may have a "base currency" (accounting currency) of
GBP, because all profits and losses are converted to GBP. For example, if a EUR/ USDposition is closed out with a profit in USDby a British bank, then the "rate-to-base" will be expressed as a GBP/ USDrate. Because of the ambiguous meaning of "base currency", many market participants use the expressions "currency 1" and "currency 2", where one unit of CCY1 equals a variable number of units of CCY2.
* [http://www.londonfx.co.uk/quoting.html Full list of currency hierarchy exceptions]
* sometimes used as a synonym for
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