Direct vs Indirect Quotes

In FX markets, a direct quote refers to the amount of domestic currency needed to purchase one unit of a foreign currency. It’s expressed as:

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Direct Quote = Units of domestic currency / 1 unit of foreign currency

For example, if you're in the UK and see GBP/USD = 1.2500, it means you need 1.25 US dollars to buy 1 British pound. Here, GBP is the base currency, and USD is the quote currency.

In FX trading:

  • The first currency in the pair is the base currency.
  • The second currency is the quote (or counter) currency.
  • The quote tells you how much of the quote currency is needed to buy one unit of the base currency.

USD as the Base Currency and Its Exceptions

The US dollar (USD) is typically used as the base currency in most FX quotes due to its global dominance. However, there are notable exceptions where USD is the quote currency instead. These exceptions include:

  • GBP/USD – British Pound is the base currency
  • EUR/USD – Euro is the base currency
  • AUD/USD – Australian Dollar is the base currency
  • NZD/USD – New Zealand Dollar is the base currency

These exceptions are rooted in historical and market conventions. For instance:

  • The British Pound (GBP) and Euro (EUR) are traditionally quoted with themselves as the base due to their historical significance and widespread use.
  • The Australian Dollar (AUD) & New Zealand Dollar (NZD are also quoted as the base currency in AUD/USD & NZD/USD due to regional trading norms.

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We return all rates as direct quotes with USD as base currency when USD is involved (with exception of GBP, EUR, AUD, NZD). For other cases, the sell currency is used as base currency.

For example:

  • BRL/USD → 5.7700 BRL per USD
  • BRL/CNY → 1.2435 CNY per BRL
  • AED/USD → 3.7057 AED per USD

This shows that when USD is involved, it’s usually the base unless the pair includes GBP, EUR, or AUD.