American Terms
When the USD is the numerator
European Terms
When the USD is the denominator.
→ NOTE:
In a ratio, the numerator number before the backslash, and the denominator is the number after the backslash, i.e. numerator/denominator.
→ EXAMPLE:
USD/CHF (American terms)
EUR/USD (European terms
Study Guide >> Definitions and Terminology >> American Terms and European Terms
7 Comments
The numerator / denominator is known in the forex ‘real world’ as the base / cross currency. I’d never heard this classed as numerator and denominator or American and European terms… good to know this for the test I guess.
Your information about european terms is wrong I think the NFA even agreed with your wrong answers
I just took the test and there were two questions about the European terms and american terms
The definition for european terms= how much foreign Currency does it cost to buy one US dollar this would make USD the base currency or as you say the numerator usd/chf is european terms not american terms
You can check many sources online as I did . The best study guide is the CTR and they got it right I think the NFA is using your definition as well
so anyone who now takes the test is automatically behind by 2 questions if they use the CTR definition
We need to fix this if possible
Can you clarify the American/European Terms…
To complicate things further, the currency notation is actually backwards as compared to mathematical notation. For example, EUR/USD in mathematical terms should be written as USD/EUR because it denotes a ratio of “USD to EUR” or “USD per EUR”, as in you get 1.3900 USD per 1 EUR, hence the price is written as 1.3900.
The same obviously goes for all currency pairs.
I agree the definition is incorrect and Scott its correct .
The phrase “American terms” means a direct quote from the point of view of someone located in the United States. For the dollar, that means that the rate is quoted in variable amounts of U.S. dollars and cents per one unit of foreign currency (e.g., $0.5774 per DEM1). The phrase “European terms” means a direct quote from the point of view of someone located in Europe. For the dollar, that means variable amounts of foreign currency per one U.S. dollar (or DEM 1.7320 per $1).
Example:
In daily life, most prices are quoted “directly”. For many years, all dollar exchange rates also were quoted directly. That meant dollar exchange rates were quoted in European terms in Europe, and in American terms in the United States. However, in 1978, as the foreign exchange market was integrating into a single global market, for convenience, the practice in the U.S. market was changed�at the initiative of the brokers community�to conform to the European convention. Thus, OTC markets in all countries now quote dollars in European terms against nearly all other currencies (amounts of foreign currency per $1). That means that the dollar is nearly always the base currency,one unit of which (one dollar) is being bought or sold for a variable amount of a foreign currency.
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