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FX Basics

Base Currency

In a currency pair, the base currency is the first currency listed, serving as the reference point for the exchange rate. It shows how much of the quote currency is needed to buy one unit of the base currency. For example, in GBP/USD, the British pound is the base currency, indicating how much one pound is worth in U.S. dollars.

  • Simple Example: TechCorp is monitoring the GBP/USD currency pair. The exchange rate of 1.3000 means that 1 British pound (base currency) is equal to 1.3000 U.S. dollars (quote currency).
  • Numerical Breakdown:
    • TechCorp is tracking GBP/USD at a rate of 1.3000.
    • To convert £100,000 into USD, multiply by the exchange rate:
      • £100,000 × 1.3000 = 130,000 USD
    • This shows that £100,000 is worth 130,000 U.S. dollars at this rate.
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