DEFINITION of quote currency
The quote currency is the second currency listed in a forex pair. It is also known as the counter currency.
The price of a forex pair reflects how much it costs to buy one unit of the base currency by selling the quote currency.
WHAT IT IS IN ESSENCE
In a pair listed as GBP/USD, USD is the quote currency. In EUR/CHF, CHF is the quote currency. The first currency listed is referred to as the base currency. GBP and EUR would be the respective base currencies for the above examples.
Understanding which currency you’re buying and selling in foreign exchange transactions is crucial, especially with the major pairs.
They drive a lot of the activity in the currency markets because they are so popular.
HOW TO USE
A forex quotation always consists of two currencies, a currency pair consisting of a base one and a quote currency.
The base currencies most often used are EUR (Euros), GBP (British pounds) AUD (Australian Dollars) and USD (US Dollars)
The quote may be any banknotes, including another of the common base bills.
As an example – EUR/USD 1.3600
Here, EUR is the base banknote and USD is the quote currency. The meaning of the quote is that one Euro is worth 1.36 US Dollars.
No matter which banknotes is the base currency, it is always equal 1.
The quoted amount in this example, 1.3600 is the amount of the quote currency, USD, it takes to equal 1 unit of the base currency, EUR.
The forex convention is that when these two currencies are compared, EUR is always the base. If instead, USD were the base banknote, the quote would look like this
The meaning of this hypothetical quote is that 1 USD equals .7352 EUR. If you divide 1 by .7352 the result is 1.36. The two results look different, but the relationship between the two currencies remains the same.