Forex Trading: Reading FX Quotes

Interbank spot rates are the current selling and buying prices for spot transactions.

In forex trading, the way in which the exchange rate is quoted for each particular pair of currencies has become standardized around the world. However, an exchange rate may be quoted differently in the domestic market compared to the international FX market.

Base Currencies and Variable Currencies

Spot rates are quoted as one unit of base currency against a number of units of variable currency (or quoted currency). The base currency is therefore the currency against which others are quoted.

X units of Variable Currency =1 unit of Base Currency

By convention when an exchange rate is named, the base rate is spoken or written first, and the variable currency second.

Examples

If the spot rate for USD/EUR (dollar/euro) is 0.7763 Deutschemarks to one dollar, this would be written:

USD/EUR 0.7763

We can apply the same principal to other exchange rates. For example, look at the spot rates below:

SGD/JPY 63.3091

AUD/CAD 0.9272

You should be able to recognize, without knowing anything else about the currencies that these rates are:

63.3091 Japanese Yen to 1 Singapore dollar

0.9272 Canadian Dollars to 1 Australian dollar