Economics - FOREX Quotes

In the Schweser reading for economics, it mentions that in EUR/USD, EUR is the base currency and USD is the price currency.

I captured this and looked up in the internet and found that in ALL OTHER EUR/USD descriptions say…

EUR is the quote currency and USD is the base currency.

Why does the Schweser and internet source says different ‘base currency’? I’m really confused at this moment.

I haven’t gotten my 2017 Schweser Notes for Level II, but in the 2016 Schweser Notes for Level II, the first paragraph on exchange rates reads, “a quote of 1.4126 USD/EUR means that each euro costs $1.4126. In this example, euro is called the base currency and USD is the price currency.”

Unless Schweser has done something utterly weird (and stupid) in the space of one year, I’d expect that when I get the 2017 Level II Schweser Notes I’ll find the same text, verbatim.

Please recheck what you read; I suspect that the fault lies with you.

Dope… maybe i might have misinterpreted… Thanks! But what I can’t grasp is what is the base currency?

If you look at the below website it says “EUR/USD 1.0717/19”, (i) EUR is the base currency and (ii) USD is the quote currency. But based on understanding from Schweser “1.4126 USD/EUR”, shouldn’t (i) EUR be the quote currency and (ii) USD the base currency in the below website?

Forex Quotes

As per my understanding, the quotation EUR/USD 1.2500 means that one euro is exchanged for 1.2500 US dollars. Here, EUR is the base currency and USD is the counter or quoted currency.

Yeah in their infinite wisdom, the CFAI have decided to quote currencies in the opposite way to 99.9999999% of market participants.

When you read EURUSD from Bloomberg for example, that’s how many dollars it costs to buy 1 euro, whereas the CFAI call that USD/EUR.

Thanks. That is the same understanding I share with you and all others…

So… basically the correct way to show is EUR(Base currency)/USD(Quote currency). But for some reasons, CFIA have decided to use it the opposite way or maybe since the quoted price is in front of the pair, they just used it the other way around?

When CFA Institute gives you a quote of A/B 1.2345, it means that it takes A1.2345 to purchase B1.0000.

Currency A is the price currency; currency B is the base currency.

The quote is written the opposite of what you’ll find in most of the real world; that’s the way things go. When you take CFA Institute’s exams, you have to do things CFA Institute’s way.

Thanks! Very clear now :slight_smile:

My pleasure.

EUR:USD, EUR/USD and EURUSD are 3 different quoting conventions as well so just be mindful of that as you are reading outside of CFAI materials.