Cross Rate.

The basis for the appearance of this term was the quotation of foreign currencies among themselves, after which the American dollar began to act as the basis for direct quotation.

Cross Rate – the exchange rate of one currency for another, while both of the currencies in the quote are not US dollars. In this case, it is absolutely no longer important in which country the exchange operation takes place.

In order to establish the exact relationship between the currencies in the cross quote, first each of the currencies is evaluated in relation to the US dollar.

Therefore, when the American currency weakens or strengthens, most rates of other world currencies also change. When calculating cross rates, a fairly simple formula is usually used

B/K = B/ USD x USD/K in this formula B is the base currency in the currency pair, K is the quoted currency, USD is the US dollar.

You can better understand how this calculation is carried out using a specific example of the cross rate:

GBP/JPY = GBP/USD x USD/JPY = 1.55 x 93.48 = 144.894, that is, for one British pound they give 144.894 Japanese Yen.

At the same time, the resulting quote may have slightly different values ​​for different dealing centers ; this is due to the difference in spreads and the delay in data submission.

Currently, it is not at all necessary to independently engage in such calculations to obtain crosses for any of the currency pairs; it is enough to simply find out the current quotes on the foreign exchange market .