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The Currency Pair

The Currency Pair

2010-06-17 14:26:00
Thomas Long, Course Instructor
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So in order to determine its value today, the FX market measures the value of one currency against another currency. The EUR/USD measures the value of the Euro in US Dollars while the USD/JPY measures the value of the US Dollar in Japanese Yen. This really isn't all that different from a stock symbol. Just think of IBM as IBM/USD which means that the quote represents the value of IBM measured in US Dollars. An IBM quote of 102 means that one share of IBM is worth $102. A EUR/USD quote of 1.2500 means the one Euro is worth $1.25. A EUR/USD quote of 1.2501 means the Euro is worth $1.25 and 1/100th of a penny. However, in the FX markets, the last digit is not referred to as 1/100th of a penny, but rather a pip which stands for Percentage in Point. When the EUR/USD moves from 1.2501 up to 1.2502, it is a move of one pip. The first currency listed is the base currency which is what we are measuring while the second currency is known as the counter currency which is what we are using to measure the value of the first currency.

Currency Abbreviations

Symbol......Definition
EUR..........Euro
GBP..........British Pound
JPY...........Japanese Yen
USD..........US Dollar
CAD..........Canadian Dollar
CHF..........Swiss Franc
NZD..........New Zealand Dollar
AUD..........Australian Dollar

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