Base currency?

Why is it so crucial or easier to make sure the base currency is the foreign currency? I understand that you could easily screw up calculating return %s if you flip flop, but the book stresses using foreign as the base, why?


if you look at the quote e.g.

1.3 USD/EUR -> it means 1 EUR (FC) = 1.3 USD

and now if that quote changes to 1.4 USD/EUR -> it means that the EUR appreciated, USD depreciated, since it now costs 1.4 USD for a EUR.

Well said

I hate the whole base currency/price currency/foreign currency/domestic currency junk. I realize that we need to distinguish the two currencies in an exchange rate quote, but the language we adopt makes it sound as though one currency is more important than another; in my opinion, it makes the discussion more difficult to follow.

to ease the confusion in my own mind I try to think of the foreign currency as a commodity . The quote is obviously in your own ( i.e. domestic ) change.

A quote of $1.3 per Euro is analogous to saying it costs $1.3 to buy a unit measure in the Euro.