 History of the Forex Markets
 The Development of the Eurodollar Market
 Understanding Spot FX Transactions
 Forex Trading: Reading FX Quotes
 Forex Quotes: Pips and the Big Figure
 Forex: Bid and Offer Rates
 BidOffer Spreads and the Market Position
 Forex Rates: Understanding Cross Rates
 Cross Rates and Different Base Currencies
 Common Practices in Foreign Exchange Markets
 Foreign Exchange Market Participants
Cross Rates and Different Base Currencies
If we look at two sets of currency pairs with different base currencies you can still adopt the same procedure to find a cross currency quote, provided that you remember the basics.
For example, suppose cable (GBP/USD) is 1.6175 and USD/CAD 1.3639/42.
We can now find the GBP/CAD cross rate as follows.


GBP will be taken as the base currency for the cross rate quotation
Bid Price  Market maker buys GBP, sells CADBuy GBP, sell USD at 1.6175Sell CAD, buy USD at 1.3639Bid price = 1.6175 X 1.3639 =2.2061 
Offer Price  Market maker sells GBP, buys CADSell GBP, buy USD at 1.6178Buy CAD, sell USD at 1.3642Offer price =1.6180 X 1.3642=2.2073 
Cross rate  GBP/CAD rate is 2.20612.2073 
Notice that in this example, since the GBP/USD rate is quoted with GBP as base, we need to multiply rather than divide to arrive at the cross rate.
Rules for Calculating Cross Rates
Other Aspects of Cross Rates
In making the above calculations, we have used two spreads, representing liquidity and volatility risk in two markets. This spread is not necessary if a position can be covered directly in one market. Spreads will be wider for lessactively traded cross currency pairs, because the market maker will split deals into two dollar positions, with equal and opposite notional dollar values, and cover them in the respective markets.
Most interbank FX transactions do not involve cross rates, i.e. do not involve the exchange of two nondollar currencies. Some cross rates, however are increasingly traded by banks in addition to US dollarbased rates.
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