Base currency

When describing Forex terms, it's important to mention this concept. It's used when trading currency pairs. Each pair consists of two currencies, the first of which is 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 the quoted currency.

Base currency – shows the currency in relation to which a purchase or sale operation is carried out; this indicator is the most important when 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 cases you will become the owner of euros.

However, for exchange trading, the correctness of the recording is important, since certain types of commissions are associated with this moment, so it is customary to fix the base currency in various types of quotes.

Features of using the base currency

It's become common practice that the most popular and liquid currencies—the US dollar and the euro—almost always serve as the first currency. When trading cryptocurrencies, cryptocurrencies are used as base currencies.

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

If a transaction indicates that a forex order to buy the USDCHF currency pair for 5 lots, this means that 500,000 US dollars were purchased.

Synonyms for this term include the quote currency, the transaction currency, the base currency in the currency pair, and so on.