Forward rate quotation
An exchange rate is usually quoted in terms of the number of an currency that can be exchanged for one unit of another currency-e.g. in the form 1,2290 EUR/USD. In this example the US$ is referred to as the “Quote Currency and Euro as Base currency.
There is a market convention that determines which is the base currency and which is the term currency. In most parts of the world, the order is EUR-GBP-AUD=AUD-NZD-USD-others. Accordingly a conversion from EUR to AUD, EUR is the base currency, AUD is the term currency and the exchange rate indicated how many Australian dollars would be paid or received for 1 euro. Cyprus and Malta which were quoted as the base to the USD and others were recently removed from this list when they joined the EURO. At Transtutors.com we provide complete assistance in our Homework Help and Assignment Help section.
The forward market for FOREX involves agreements to buy and sell foreign currencies in the future at prices agreed upon today.
• Bank quotes for 1, 3, 6, 9, and 12 month maturities are readily available for forward
• Longer-term swaps are available. Homework Help and assignment help at our Transtutors.com in a cost effective and time effective manner without compromising the quality of the answers.
Quotes using a country’s home currency as the Price currency( e.g. EUR 1.00= USD 1.35991 in the URO zone) are known as indirect quotation or quantity quotation and are used in British newspaper and are also common in Australia, New Zealand and the euro zone.
Using direct quotation, if the currencies is strengthening (i.e. appreciating, or becoming more valuable) then the exchange rate number decreases. Conversely if the foreign currency is strengthening, the exchange rate number increases and the home currency is depreciating. Market convention from the early 1980s to 2006 was the most currency pairs were quoted to 4 decimal places for spot transactions and up to 6 decimal places for forward outrights or swaps.( the fourth decimal place is usually referred to as “pip”). An exception to this was exchange rates with value of less than 1000 which were usually quoted to 5 or 6 decimal place. Although there is no fixed rule, exchange rates with a value greater than around 20 were usually quoted in to 3 decimal places and currencies with a value greater than 80 were quoted to 2 decimal places. Homework and Assignment Help at our Transtutors.com by efficient tutors
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