Question #2 from 2009 Reading 19 CFA text says: “Suppose that the spot Euro: is equal to 1.1795. Question #2 from 2008 Reading 19 CFA text says: "The /Euro is equal to 1.1795.” This is pronounced dollars per euro, right? **I know this question may seem simple, but should I assume that “Euro:" is the same as saying "/Euro”? Why the new colon (
? Does that seem odd?
Euro: --\> Euro to ratio?
Yes, Euro: means the same as /Euro. If this helps at all, the way i am trying to remember it is: Euro: , is the first currency expressed in units of the second currency. /Euro , is a straight devision resulting, in this case, in units of $ per one unit of Euro. (which is the same as the one above)
euro:$ = dollar/euro.
Yes, euro:$ means that the quoted currency is euro, and it is quoted in terms of no. of USD.
Thank you
If you mess around with FX trading a bit (practice accounts if you don’t want to risk money), you’ll get all of this down by heart. If you’re still perplexed, you can think about common combinations and infer logically what is the numerator and what is the denominator. For example, get to know that USD:JPY is a common currency pair. The value for USD:JPY is 97.64 right now. Given what you know about the yen, you can figure out that it must be JPY/USD, that is 1 dollar priced in yen.
I could be wrong but if the quote is USD:JPY is 97.64 (the in terms of Yen),then shouldn't the ratio be USD/JPY=97.64? The amount of yen per . or is this an indirect quote?
You may already know, but the dollar is the base currency for all pairs, except for the EUR/USD and GBP/USD. So, unless otherwise stated, for these two pairs, you should assume that the rate is how many dollars you can buy with 1 EUR or GBP, i.e. EUR/USD = 1.28 means that you can buy $1.28 with 1 Euro. You simply invert the number to get how many Euros you can buy with a dollar, but you should not be writing on paper USD/EUR. Hope that makes sense.
I got ya. Thanks jmuc85
Hockey Wrote: ------------------------------------------------------- > If you mess around with FX trading a bit (practice > accounts if you don’t want to risk money), you’ll > get all of this down by heart. If you’re still > perplexed, you can think about common combinations > and infer logically what is the numerator and what > is the denominator. For example, get to know that > USD:JPY is a common currency pair. The value for > USD:JPY is 97.64 right now. Given what you know > about the yen, you can figure out that it must be > JPY/USD, that is 1 dollar priced in yen. Could you suggest a way to practice this? I had trouble with this last year, especially with the PM section that built on the econ FX relationships and I’m having trouble again this year.
Bradleyz Wrote: ------------------------------------------------------- > Hockey Wrote: > -------------------------------------------------- > ----- > > If you mess around with FX trading a bit > (practice > > accounts if you don’t want to risk money), > you’ll > > get all of this down by heart. If you’re still > > perplexed, you can think about common > combinations > > and infer logically what is the numerator and > what > > is the denominator. For example, get to know > that > > USD:JPY is a common currency pair. The value > for > > USD:JPY is 97.64 right now. Given what you know > > about the yen, you can figure out that it must > be > > JPY/USD, that is 1 dollar priced in yen. > > > Could you suggest a way to practice this? I had > trouble with this last year, especially with the > PM section that built on the econ FX relationships > and I’m having trouble again this year. Sure…go to forex.com and create a practice account. See how far you can get with your fake $50,000
There are two conventions: 1) / Euro means: a) how many dollars per Euro or b) the price of a Euro measured in (against) dollars; Convesely, Euro/ means: a) how many Euros per Dollar, or, b) The cost of a dollar measured in (against) Euros 2) Euro: means: a) how many dollars per Euro, or b) the cost of a Euro measured in (against) the dollar Conversely :Euro means: a) how many Euros per dollar b) the cost of the dollar measured in Euros Therefore: Euro / = :E and / Euro = E: The question is therefore correct I’m anticiating the exam will use both conventions, perhaps in the same question. I intend to write it out both ways.
in FX, currencies are quoted in this fastion: BASE CCY / ALT CCY Base Curerncy = The Asset currency , the asset you are quantifying Alternate Currency = The Numeraie currency, the amount of alternate currency that equals 1 base currency. The most liquid currencies (usually refers to the G7s ) are the following: (off current market rates) EUR/USD 1.2850 GBP/USD 1.5820 AUD/USD 0.6725 NZD/USD 0.5935 USD/JPY 97.75 USD/CAD 1.1755 USD/CHF 1.1635 This is the market convention of quoting. In this case the Currency that is listed first is ALWAYS the base (asset currency). The base currency will always be Asset that is being quantified. So how much is Euro worth against USD? 1.2850 USD per one Euro How much is the Kiwi worth against the USD? 0.5935 USD per one Kiwi (NZD) The higher the number , the more the Base Currency is worth. and Vice Versa. Is the Yen stronger at 97.75 or 80 against the dollar? You will look at the lower number (80) ; it only takes 80 yen (instead of 97.75) to buy 1 USD now yen must have appreciated. Once you familiarize with the quoting convention this will be a piece of cake.
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ghayes01 Wrote: ------------------------------------------------------- > There are two conventions: > 1) / Euro means: \> a) how many dollars per Euro or \> b) the price of a Euro measured in (against) \> dollars; \> \> Convesely, Euro/ means: > a) how many Euros per Dollar, or, > b) The cost of a dollar measured in (against) > Euros > > 2) Euro: means: \> a) how many dollars per Euro, or \> b) the cost of a Euro measured in (against) the \> dollar \> \> Conversely \> :Euro means: > a) how many Euros per dollar > b) the cost of the dollar measured in Euros > > Therefore: > Euro / = :E > and > / Euro = E: > > The question is therefore correct > > I’m anticiating the exam will use both > conventions, perhaps in the same question. I > intend to write it out both ways. No, they don’t use both conventions. They only use /