What are Currency Pairs

While trading currencies, always two transactions will take place simultaneously. This has to do with the fact that currencies are always traded in pairs, named the so-called currency pairs. A well-known example of a currency pair is EUR/USD.

The first mentioned currency as part of a currency pair is also called the base currency and the second currency is called the counter currency or the quote currency. In the case of EUR/USD, the EUR is the base currency and the USD is the de counter/quote currency.

EUR/USD = Base Currency/Counter Currency

How do you have to read the price of a currency pair?

currency pairsThe price of a currency pair is always reproduced by means of a number consisting of four digits behind the comma. The only exception to this, are the currency pairs, in which the Japanese (JPY) appears. If that’s the case, the price always will be reproduced with two digits behind the comma.

An example of a number with four digits behind the comma, is the price of EUR/USD which is quoted at 1,3582. This means, that you’ll have to pay 1,3582 USD to be able to get 1 EUR.

An example of a currency pair with two digits behind the comma, is the price of USD/JPY which is quoted at 83,46. In this case you’ll therefore have to pay 83,46 JPY to get 1 USD.

In fact the price expresses how much of the counter currency you’ll have to pay to buy one unit of the base currency.

Hierarchy of the base currencies

The Euro (EUR) as part of a currency pair is always the base currency and that’s the reason why a currency pair containing a Euro, always starts with EUR. In that case you may consider EUR/USD, EUR/GPB. EUR/JPY, EUR/CHF etc.

As for the British Pound (GPB) in fact the same applies. The GPB is also always the base currency in case of currency pairs, except in case of EUR/GPB. In this case you may consider GBP/USD, GPB/JPY, GBP/AUD etc.

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