Quote currency — Definition Explained Simply | Examples & Role
Quote currency is the currency in which the value of the base currency is expressed when forming an exchange rate quotation.
Quote currency is the currency used to express the price of another currency (the base currency) in a currency pair. In a quotation, it is always listed second. For example, in the EUR/USD pair the quote currency is the US dollar, since the rate shows how many dollars must be paid for one euro.
According to international practice on the currency markets (Forex), the quote currency is also called the counter currency. It plays the role of a “price tag,” showing the value of one unit of the base currency. In real transactions, the quote currency is often the one actually used for settlements.
Quote currency and currency pairs
Every currency pair consists of two currencies: the base currency and the quote currency. The first shows what we are measuring, and the second shows in what terms we are measuring it. For example, if the USD/JPY pair is quoted at 150, this means that 1 US dollar (base currency) is worth 150 Japanese yen (quote currency).
The role of the quote currency in trading
The quote currency is used to calculate a trader’s profit or loss as well as the trade volume. In many cases, it is also the investor’s national currency in which actual settlements take place. For example, for European companies the US dollar often acts as the quote currency, since most global contracts are denominated in dollars.
Examples
- In the EUR/USD pair, the quote currency is the US dollar.
- In the GBP/JPY pair, the quote currency is the Japanese yen.
- If USD/CHF is 0.95, this means that 1 US dollar equals 0.95 Swiss francs — here the franc is the quote currency.