Exchange rate

From Traderpedia

The conversion ratio between two currencies in the foreign exchange market.

For example, the US Dollar might have an exchange rate of 1.20 to the Euro. That means it would take 1.20 Dollars to equal 1 Euro.

[edit] Exchange Rate Quotes

The forex market trades is currency pairs. These pairs use a standardized quote structure of Base/Quote. Those pair quote can be thought of in terms of how much of the Quote currency it takes to make one unit of the Base currency.

Currency pair quote use standardized three character abbreviations known as SWIFT or ISO codes. The codes for the major (most active) currencies are:

  • AUD - Australian Dollar
  • CAD - Canadian Dollar
  • EUR - Euro
  • JPY - Japanese Yen
  • GBP - British Pound
  • CHF - Swiss Franc
  • USD - U.S. Dollar

Putting this together, EUR/USD is the number of U.S. Dollars it takes to equate to 1 Euro.

[edit] Common Terms