Search
Close this search box.

Table of Contents

Quote Currency



Definition

The quote currency, in the world of finance, is the second currency listed in a currency pair transaction. It’s also known as the “counter currency” or “secondary currency”. The value of the quote currency is used to determine the value of the base (first) currency in a currency exchange rate.

Phonetic

The phonetics of the keyword “Quote Currency” is: /kwoʊt ˈkɜːrənsi/

Key Takeaways

Key Takeaways about Quote Currency

Key Takeaways about Quote Currency

  1. Definition: The quote currency, also known as the “counter” or “secondary” currency, is the second currency quoted in a currency pair in forex trading. It is used as a reference to determine the value of another currency (base currency).
  2. Value Representation: In a currency pair, the value of a quote currency is needed to buy one unit of the base currency. For example, in the pair USD/EUR, EUR is the quote currency. If it’s quoted at 0.85, that means you need 0.85 Euros to buy one US Dollar.
  3. Trade Profit or Loss: In Forex trading, the profit or loss is determined by the fluctuations in the quote currency, hence understanding the dynamics of the quote currency is crucial for making successful trading decisions.

Importance

The term “quote currency” holds significant importance in business and finance, particularly in the realm of foreign exchange trading. It is the second currency listed in a currency pair and is used to value the base currency. For instance, in a USD/EUR pair, EUR is the quote currency. The relevance of the quote currency comes from its ability to determine the value of the exchanged currency in a transaction. The international market uses the quote currency to dictate the price one would pay to convert the base currency. Thus, understanding the concept of a quote currency is essential for forex traders, international businesses, and investors to make informed decisions and efficiently manage currency risk.

Explanation

Quote currency, also known as secondary or counter currency, performs a crucial role in the foreign exchange (Forex) market and international trade, helping individuals and businesses determine the worth of one currency against another. It is the second currency listed in a currency pair transaction. The value of the quote currency is used to equate what amount of it equals one unit of the primary currency. This gives traders a clear understanding of a currency pair’s worth, which is vital in the decision-making process during Forex transactions, like if the trade is profitable or not.Furthermore, the quote currency is used to express the changes in exchange rates. If the exchange rate of the currency pair rises, that means the quote currency has weakened against the base currency, and conversely, if it falls, the quote currency has strengthened. Essentially, quote currency helps in illustrating the economic strength of a particular country vs. another, providing important information to both investors and nations. For example, an exporter can decide to which country to export based on the strength of the country’s quote currency. Hence, it becomes a vital tool in hedging and risk management strategies.

Examples

1. US Dollar against Euro: In this currency pair (USD/EUR), the USD is the base currency, and the Euro is the quote currency. If the USD/EUR rate is 0.85, this means that 1 USD is equivalent to 0.85 Euros.2. British Pound against Japanese Yen: If we are focusing on the GB/JPY currency pair, the British Pound is the base currency and the Japanese yen is the quote currency. For example, if the GBP/JPY rate is 150, this means 1 British Pound can be exchanged for 150 Japanese yen.3. Canadian Dollar against US Dollar: In the currency pair CAD/USD, the CAD is the base currency, and the USD is the quote currency. If the CAD/USD rate is 0.80, this means 1 Canadian Dollar can be exchanged for 0.80 US dollar.

Frequently Asked Questions(FAQ)

What is quote currency?

Quote currency, also known as the counter or secondary currency , is the second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency.

How is quote currency used in forex trading?

In forex trading, currencies are quoted in pairs. The quote currency is how much of that currency is needed to buy 1 unit of the base currency. For instance, if the EUR/USD exchange rate is 1.20, that means you need 1.20 USD (quote currency) to buy 1 EUR (base currency).

Is quote currency the same as a base currency?

No, quote currency is not the same as a base currency. In a Forex quote, the first currency listed is the base currency, and the second is the quote currency.

What is the significance of quote currency in exchange rates?

When you’re looking at an exchange rate, the quote currency can give you a clear understanding of its value in relation to the base currency. In essence, the exchange rate tells you how much of the quote (or secondary) currency you would need in order to purchase one unit of the base (or primary) currency.

Can the quote currency be a domestic or foreign currency?

Yes, the quote currency could either be a domestic or foreign currency. This would depend largely on the perspective from which you’re viewing the exchange rate. If it’s a direct quote, the quote currency will be the foreign currency. In an indirect quote, the quote currency will be the domestic one.

Related Finance Terms

  • Base Currency
  • Exchange Rate
  • Forex Market
  • Currency Pair
  • Foreign Exchange Transaction

Sources for More Information


About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More