niki_1079 (CA Practice ) (279 Points)
09 July 2008How we can derive which is base currency and which is quote currency in forex problem. As per ACI Convention base currency is written first and then quote currency like
£/$ = 1.5 means
1£ = 1.5$
But in most of the questions base currency is written after quote currency like
Rs/$ = 45 means
1$ = 45 Rs.
How do we come to know in exam is there any method to know abt the base & Quote currency. If there is any then pls explain me.
Karan
(Job)
(209 Points)
Replied 09 July 2008
Hi Niki,
There is not any specific method of identifying that which is the base currency and which one is the quote currency in forex but you can use the following presumtions:-
1. As you said as per the ACI Convention the base currency is written on the left hand side and the quote currency is written on the write hand side. So take this convention for identification. e.g; in case of your example Dollar is the base as it written on the left hand side of the quote. If you are not clear you can take the second presumption which is:
2. Give priority to the Market parity for identifying which the base and which one is the quote as in your case Dollar has the lower value attatched with it and Sterling has the greater value 1.5 ,so in this case it's clear that Sterling is the quote currency and Dollar is the base.
Hope this helps!
Regards
Karan
CAclubindia
