Quote currency
Family I · Instruments
Not to be confused with clusd currency pair, currency pair, znusd currency pair.
Quote currency is the second currency in a currency pair and the one in which the exchange rate is expressed. It indicates the amount of that currency required to purchase one unit of the base currency. For example, in EUR/USD, the quote currency is USD.[1]
Role in a currency pair
Every currency pair has a base currency (first) and a quote currency (second). The quoted price is the number of quote currency units needed to buy one base currency unit. When the rate changes, it reflects the changing value of the base currency relative to the quote currency.
The quote currency is also the settlement currency for the pair's profit or loss when the trade is closed in that pair.
Worked example
Variations and conventions
Which currency appears as the quote currency depends on market convention and the specific pair. For instance, in USD/JPY, the quote currency is JPY, while in GBP/USD, it is USD. The quote currency can be any currency, and its role is defined solely by its position in the pair.
Brokers may allow accounts to be denominated in different currencies, which can affect conversion when realising profits or losses. Always check the contract specifications for the exact settlement currency of a given instrument.
Often confused with
- clusd currency pair
- In a CLUSD currency pair, the quote currency is USD, but the term itself refers to the entire pair, not just the second currency; the visible sign is that CLUSD is a specific pair symbol, whereas quote currency is a component role.
- currency pair
- A currency pair is the complete quotation of two currencies, while the quote currency is only the second of the two; the visible sign is that a currency pair is written as a slash-separated pair like EUR/USD, whereas the quote currency is just the part after the slash.
- znusd currency pair
- In a ZNUSD currency pair, the quote currency is USD, but the term denotes the whole instrument, not the individual currency; the visible sign is that ZNUSD is a pair ticker, whereas quote currency is a general term for the second currency in any pair.
See also
References
- ↑ ISO 4217, the international standard that assigns each currency its three-letter code. The codes used in every pair quotation come from this standard, not from brokers.