What Is Base Currency?

Base curre꧂ncy refers to the first currency that appears in a currency pair.

In the foreign exchange (forex) market, currency unit prices are quoted as currency pairs. The base currency is normally considered the domestic currency and is followed by the 澳洲幸运5官方开奖结果体彩网:quote currency, also known as the counter currency, i𒉰n the pair. In the forex market, currency pairs are commonly depicted as XXX/YYY where the XXX is the base currency.

For example, you might see USD/GBP (United States dollars to British pounds). In this case, USD is the base currency, and GBP is the quote currency. The currency pair represents how much of the quote currency you need to get one unit of the base currency.

Understanding Base Currencies

The foreign exchange or forex market (FX) is the market where currencies are traded. It is one of the most liquid markets in the world with trillions traded each day. Trades are made using currency pairs, where one is the base currency the other is the quote or counter currency. Pairs ar🥃e written as XXX/YYY or simply XXXYYY, where XXX is the base currency and YYY is the quote currency. For example, you might see GBP/AUD, EUR/USD, USD/JPY, GBPJPY, EURNZD, and EURCHF.

These currencies are represented using currency codes. The abbreviations used for currencies are prescribed by the International Orgaꦏn🐼ization for Standardization (ISO). These codes are provided in standard ISO 4217. Currency pairs use these codes made of three letters to 🍎represent a particular currency.

The major curre🎃ncy codes used i♉n currency pairs include:

• USD for the U.S. dollar
• EUR for the euro
• JPY for the Japanese yen
• GBP for the British pound
• CNY for the 澳洲幸运5官方开奖结果体彩网:Chinese yuan or renminbi (renminbi is also abbreviated RMB)
• AUD for the Australian dollar
• CAD for the Canadian dollar
• CHF for the Swiss franc

For example, if you were looking at the CAD/USD currency pair, the 澳洲幸运5官方开奖结果体彩网:Canadian dollar is the base currency and the U.S. dol🅘lar is the quote currenꦍcy.

Traders use the currency pair to determine how much of the quote currency is needed for them to purchase one unit of the base currency. The U.S. dollar, or USD, is one of the most common base currencies in the forex market.

How Forex Traders Use Currency Pairs

Forex quotations are stated as pairs because investors simultaneously buy and sell currencies. For example, when a buyer purchases EUR/USD, it means that he is buying euros and selling U.S. dollars at the same time. When the base currency (EUR) is strong, it takes morꦛe of the quote currency (USD) to buy a single unit of the base currency. This means that a trader has to use more U.S. dollars to buy a single Euro.

Investors generally buy the pair if they think that the base currency will gain value in contrast with the quote currency. On the other hand, they may decide to sell the pair if they think that the base currency will lose value in contrast with the quote currency.

How to Read Base Currencies

When provided with an exchange rate, currency pairs💟 indicate how much of the quote currency is 🐽needed to buy one unit of the provided base currency. For example, a forex market might display:

EUR/USD = 1.55

In this case, the euro (EUR) is the base currency, and the U.S. d♒ollar (USD) is the quote currency. The number indicates how much of the quote currency is needed to purchase one of the base currency. In this case, €1 is equal to $1.55.

According to foreign exchange standards, if a trader wants to purchase €1, they must pay $1.55. The currency pair quotation is read in the same manner when selling the base currency, so if a seller wants to sell €1, they will get $1.55 for it.

The Bottom Line

Forex assets are sold in pairs like the USD/GBP, the USD/CAD, and the USD/CHF. The first currency in the pair is the base currency, while the second is the quote currency. Forex currency pairs show how much of a quote 🍸currency traders need to sell 🌺to buy one unit of the base currency.

When deciding which base currency to use, forex traders consider the economy of the home country and how heavily it is traded. Some may also have a preferred currency that they always use as a base currency. As a base currency grows stronger, it takes more of a quote currency to buy one unit. Forex traders try to buy pairs in which they expect the base currency to grow stronger relative to the quote currency.