Base and Quote Currencies Explained (With Examples)
The forex market can be confusing, especially for beginners. Read on to discover the basics of base and quote currencies and how they work.
Updated November 14, 2023.
In the forex market, all of the assets are displayed as currency pairs, where the value of the asset denominates the amount required to buy one currency with another.
A typical example of a currency pair is EUR/USD—the EUR is the base currency (also known as the transaction currency) while USD is the quote currency (or the counter currency).
What Is Base Currency?
The base currency represents how many units you need to buy one unit of the quote currency. So, if the EUR/USD pair currently trades at 1.03, you'll need to sell 1.03 euros to buy 1 US dollar.
Of course, the base currency rate is subject to very frequent change, as there are a lot of factors potentially impacting the number, like current interest rates, GDP, and macroeconomic events.
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What Is Quote Currency?
The quote currency (also known as the counter currency) is the second currency in a forex pair, which indirectly denominates the value of the first (the base) currency.
In the example above with EUR/USD, USD is the quote currency, which is the currency we're intending on buying.
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