In Forex, Usd/sgd, If Home Currency Is Sgd, Is This A Direct Or Indirect Quotation?
February 27th, 2010 | by Frenday |From my understanding, the first line (USD) is the base/unit currency and the second line (SGD) is the price currency. If I am checking the quote in Singapore, the Base currency is a foreign currency (USD) and the quoted currency is SGD. i.e. USD/SGD is the quotation a direct or indirect quotation? Some other references say that the base currency should be home currency and thereby this quote (USD/SGD) is an indirect quotation. Why is there such difference?
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2 Responses to “In Forex, Usd/sgd, If Home Currency Is Sgd, Is This A Direct Or Indirect Quotation?”
By PaSSerbY on Feb 27, 2010 | Reply
It depends which convention you are using.
For the international convention, quotes are shown with the base currency after the “/”. This is used mainly in the US. For Asia Pacific countries, I understand that most of them show the quote with the base currency before the “/”.
Direct quote: Home currency price of 1 unit of foreign currency
Indirect quote: Foreign currency price of 1 unit of home currency
However, direct and indirect quotes are relative to a trader’s domicile or location. In your example (assuming you are in the US), if USD is the base currency, then USD/SGD is an indirect quote. If you are in Singapore, then it is a direct quote.
The important thing is that what is quoted is what matters, it doesn’t matter whether it is a direct or indirect quote, so long as you know which currency is the base currency.
By WP Robot Wordpress Autoposter on Feb 27, 2010 | Reply
It depends on which unit you want to be the fixed (base) unit (at a value of one).
Indirect Quote
A foreign exchange rate quoted as the foreign currency per unit of the domestic currency. In an indirect quote, the foreign currency is a variable amount and the domestic currency is fixed at one unit.
For example, in the U.S., an indirect quote for the Canadian dollar would be C$1.17 = US$1. Conversely, in Canada an indirect quote for U.S. dollars would be US$0.85 = C$1. http://www.investopedia.com/terms/i/indi…
Base Currency:
The first currency quoted in a currency pair on forex. It is also typically considered the domestic currency or accounting currency. For accounting purposes, a firm may use the base currency to represent all profits and losses.
It is sometimes referred to as the “primary currency”.
For example, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. dollar would be the quote currency. The price represents how much of the quote currency is needed for you to get one unit of the base currency. http://www.investopedia.com/terms/b/base…