Understanding Forex quotes
Reading a Forex quote may seem a
bit confusing at first. However, it's really quite simple if you remember two
things: 1) The first currency listed first is the base currency and 2) the value
of the base currency is always 1.
The US dollar is the centerpiece of the
Forex market and is normally considered the 'base' currency for
quotes. In the "Majors", this includes USD/JPY, USD/CHF and USD/CAD. For these
currencies and many others, quotes are expressed as a unit of $1 USD per the
second currency quoted in the pair. For example, a quote of USD/JPY 110.01 means
that one U.S. dollar is equal to 110.01 Japanese yen.
When the U.S. dollar is the base unit and a currency quote goes up, it means
the dollar has appreciated in value and the other currency has weakened. If the
USD/JPY quote we previously mentioned increases to 113.01, the dollar is
stronger because it will now buy more yen than before.
