Quick FX help

I scored 10-15% lower than normal on my EOC quiz.

Can anyone clarify:

-price and base currency, domestic and foreign currency: USD-EUR vs EUR/USD

-when to use the reciprocal for cross rates using 3 currencies and % change in, for example, JPY relative to USD, etc

Sorry was there a question here?

Interesting to see that this is now covered in L1…I just had to cover it as part of the L2 syllabus.

Price and base are pretty straightforward, base is the whole unit - the currency we’re buying another with. If you think about it there’s two values to a rate, 1 and some number, .4016 or whatever. I just remember it as base is kind of like standard and will always be the same amt (1) while prices vary.

for cross rates just write out the currency’s and cancel out as necessary.

Aus/usd * usd/cad = Aus/cad (the usd’s cancel)

like explained above, the base caurrency is the currency we are buying and the price currency is the price we are paying for the base currency, eg 0.500 GBP/USD means we are buying 1USD for 0.500GBP, therefore the GBP is the price currency and the USD is the base currency.

domestic and foreign currency depends on where you are resident, eg i reside in Botswana so our currency is my domestic currency and all other countries’ currencies are ‘foreign’. a US resident will have the dollar as their domestic currency and other currencies eg GBP as foreign.

for cross rates, just cross multiply as recommened above. % change is kinda straight forward (closing exch rate-opening exchange rate)/opening exchange rate. just need to be careful when distinguishing between currency appreciation and depreciation.