This Q is from Equity CFAI page. 91 Question 15. and will most likely be tested. try it out. When we have 36,216.18 GBP, why do we convert at the 1.5010 ask instead of the bid of 1.5005 to get back at US Dollars? In Question 10, we were selling back at the Bid, which makes sense, but now we are selling at the ask?? thank you!
If the quote is something like 1.5000-1.5010GBP/$ the denominator currency is the currency in which the dealer is “making a market,” i.e he only buys and sells dollars, so he will buy dollars at the bid and sell dollars at the ask. Hence, if you have British pounds and want to get dollars you are going to be buying dollars and the dealer will be selling them to you hence the transaction occurs at the ask.