The Major Currency Pair

Foreign exchange (forex) traders use the term cross rate to refer to price quotes between any pair of currency in which neither is the U.S. dollar.

Most transactions on the forex are in major currency pairs. That is, one of the currencies being swapped is the U.S. dollar. For example, if you see on a financial news site that USD/CAD is quoted at 1.28, it means that one U.S. dollar is currently equal to 1.28 Canadian dollars.

A cross rate also refers to a currency pair or transaction that does not involve the currency of the party initiating the transaction.

An exchange rate between the euro and the Japanese yen is considered to be a commonly quoted cross rate because it does not include the U.S. dollar. In the pure sense of the definition, however, it is considered a cross rate if it is referenced by a speaker or writer who is not in Japan or one of the countries that use the euro as its official currency. While the pure definition of a cross rate requires that it be referenced in a place where neither currency is used, the term is primarily used to reference a trade or quote that does not include the U.S. dollar.

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