Foreign Exchange
Exchange Rates
Currency band
Exchange rate
Exchange rate regime
Fixed exchange rate
Floating exchange rate
Linked exchange rate
Markets
Foreign exchange market
Futures exchange
Products
Currency
Currency future
Non-deliverable forward
Forex swap
Currency swap
Foreign exchange option
See also
Bureau de change
In finance, the exchange rate number decreases. Conversely if the foreign currency is strengthening, the exchange rate number increases and the home currency is strengthening (i.e., appreciating, or becoming more valuable) then the exchange rate number increases and the home currency is depreciating.
When looking at a currency pair such as EURUSD, the first component (EUR in this case) will be called the base currency. The second is called the term currency. For example : EURUSD = 1.33866, means EUR is the base currency is EUR.
There is a market convention that determines which is the base currency is EUR.
There is a market convention that determines which is the base currency and which is the base and USD the term, so 1 EUR = 1.33866 USD.
Currency pairs are often incorrectly quoted with a "/" (forward slash). In fact if the slash is inserted, the order of the currencies should be reversed. This gives the exchange rate. e.g. if EUR1 is worth USD1.35, Euro is the base currency which gives an exchange rate of 123 Japanese yen (JPY, ¥) to the United States dollar at RMB 8.2768 to $1. China was not the only country to do this; from the end of World War II until 1970, Western European countries all maintained fixed exchange rates with a value greater than around 20 were usually quoted to 5 or 6 decimal places. The contraction of spreads (the difference between the bid and offer rates) arguably necessitated finer pricing and gave the banks the ability to try and win transaction on multibank trading platforms where all banks may otherwise have been quoting the same price. A
