Forex Quoting Convention

Does anyone else get frustrated by the fact that the CFAI uses a different quotation convention for foreign exchange than the standard convention? For example, in standard market convention the first currency is the base currency, so EUR/USD means “the price of the Euro (Base Currency) quoted in dollars” and USD/JPY means “the price of the USD (base Currency) quoted in Japaneese Yen.” However, on the exams, the CFAI write their quotes as fractions as do many other econ books taht I have seen, so for example the EUR/USD would mean “Euros per US Dollar (Base Currency)” or the Price of $1 quoted in Euros. I continually had to shift my way of thinking when I took level 2.

I believe the texts were recently updated to reflect the standard convention using a colon, EUR:USD, and maintained the use of EUR/USD to mean the faction where the USD is the Base currency. However you often see EUR:USD and EUR/USD to mean the same thing. This was rather frustrating when taking the exams.

I think the world be much better if we gave forex the SI treatment. I like the colon better since I always read per when I see a /. Anyway, I just read x USD/JPY to mean 1USD equals x JPY and then put everything in terms that don’t confuse me (like changing between units in SI), rather than use someone else’s terrible explanation. The whole base currency, foreign currency, domestic currency didn’t help me at all in remembering anything, keeping that shit straight resulted in a lot of hours wasted.

omg yes!! Very frustrating! It’s even made me start second guessing myself now with the rules I use for calculating cross rates and whatnot :frowning: grrrrr

I never know anymore what to do if I see a slash. Slash always means “per” to me. I can handle EURUSD or EUR:USD But I never know for sure if EUR/USD is intended to be just EURUSD with a slash in it or USDEUR being euros per dollar.

In real life, most of currency quotations are unambiguous, as people are familiar with the general levels. If you see something like 1.3 EURUSD, you know that must be USD/EUR, since one EUR is more than one USD. Of course, it gets a bit confusing when you see something like USDCAD or AUDUSD, which are close to parity. However, when you do a trade, people generally clarify by saying something like “you sell X amount of USD and buy Y amount of CAD”.

Very frustrating, very confusing. Especially for some less common currency cross like SEK/NOK where most people don’t have a feeling for which one is bigger. How do you solve it? And why has CFAI chosen to quote in the opposite way to what I gather is the general quoting convention??

I understand that in CFAI terms the quotation is 1.22 SEK/NOK but the internationally generally more used convention is written as 1.22 NOK/SEK. Is that correct?

the convention is that the more valuable currency should be quoted first…