How to Read Currency Pairs

Currency Pair

Foreign exchange exchanging involves the simultaneous purchasing and selling of currencies. Understanding currency pairs is crucial as they form the basis for all forex transactions.

Currencies in forex are commonly quoted in pairs, such as EUR/USD or GBP/JPY, with the first currency being the Base Currency and the second currency being the Quote Currency or the Variable Currency. You sell the base currency to purchase the quotation currency.

For example, if the EUR/USD quote is 1.20, it means that 1 Euro can be exchanged for 1.20 US dollars.

Base Currency

The base currency is the first currency in a currency pair and the currency that is being quoted. It is the currency that is used to express the value of the other currency.

The Euro acts as the base currency in the EUR/USD pair.

Quote/Variable Currency

The variable currency or quote currency is the second currency in a currency pair and the currency that is used to express the value of the base currency.

For example, in the EUR/USD pair, the US dollar is the variable currency. The variable currency is used to buy or sell the base currency.