I get confused at times between the base and price currency.
I just want to confirm that the base currency is the domestic and the price is the foreign currency, correct?
What confuses me are things like, for example, $1.183/Euro, $$ to Eure… i’m assuming that the Dollar is the price currency in this case, correct?
Thanks in advance!
Quotes can be given in foreign currency per unit of domestic currency, or domestic currency per unit of foreign currency; “per unit of” means the base currency.
If the quote reads USD/EUR 1.1098 (meaning USD1.1098 = EUR1.0), EUR is the base currency, USD is the price currency. For an investor in the US, USD is the domestic currency, EUR is the foreign currency; for an investor in Germany, USD is the foreign currency, EUR is the domestic currency.
If the quote reads EUR/USD 0.9010 (meaning EUR0.9010 = USD1.0), USD is the base currency, EUR is the price currency. For an investor in the US, USD is the domestic currency, EUR is the foreign currency; for an investor in Germany, USD is the foreign currency, EUR is the domestic currency.
Thank you S2000!! your answer will make a big difference for me on exam day!
My pleasure.
Glad to be of some help.