Base currency

When describing Forex terms, you cannot miss this concept. It is used when using currency pairs in trading, each pair consists of two currencies, the first of which is precisely the base currency of the currency pair.

For example, in the USDCHF pair, the US dollar is the base currency, and the Swiss franc is already quoted.

Base currency – shows in relation to which monetary unit the purchase or sale operation is carried out; this indicator is the most important in characterizing all Forex transactions.

This concept is quite relative, because there is absolutely no difference between selling dollars for euros or buying euros for dollars, because in both the first and second cases you will become the owner of the euro.

But for stock trading, the correctness of the recording is important, since certain types of commissions are associated with this point, so it is customary to record the base currency in various types of quotes.

Features of using the base currency

It has already happened that the first currency is almost always the most popular and liquid monetary units - the US dollar, the euro. When trading cryptocurrencies, cryptocurrencies are used as base currencies.

The volume of the transaction is calculated in the base currency and a quote is applied to it; for example, the quote for the USDCHF currency pair of 0.9325 tells us that 1 US dollar equals 0.93 Swiss francs.

And if during a transaction it is indicated that a Forex order to buy the USDCHF currency pair in the amount of 5 lots, this means that 500,000 US dollars were purchased.

Synonyms for this term are also concepts such as quote currency, transaction currency, main currency in a currency pair, etc.