Base Currency
In Forex markets, the base currency is the first currency in a currency pair (a quotation of two different currencies, depicting how many units of the counter currency are needed to buy one unit of the base currency).
Quote Currency
The quote currency is the second currency quoted in a currency pair. In a direct quote, the quote currency is the domestic currency. In an indirect quote, the quote currency is the domestic currency.
Terms Currency
Terms currency is another way to refer to a quote currency—a currency quotation shows how many units of the terms currency will equal 1 unit of the base currency.
Secondary Currency
Also known as ‘variable currency’ or ‘counter currency’, the secondary currency is the currency that the investor trades the base currency against (i.e. USD in EUR/USD).
→ EXAMPLES:
(1)
Australian Dollar (AUD) against United States Dollar (USD): AUD/USD 0.6660
Australian Dollars is the base currency, and US Dollars is the terms currency. One Australian Dollar is equal to 0.666 US Dollar (66.6 US cents).
(2)
EUR/USD = 1.35
EUR = Base Currency
USD = Counter Currency
Price = to buy one Euro you will need to spend $1.35US
If a quotation goes up then it means that the base currency is getting stronger vis-à-vis the counter currency.
(3)
EUR/USD = 1.6
Now, one euro is exchanges for $1.6US.
If a quotation goes down then it means that the base currency is getting weaker vis-à-vis the counter currency.
(4)
EUR/USD = 1.2
Now, one euro is exchanges for $1.2US.
Study Guide >> Definitions and Terminology >> Base currency, quote currency, terms currency, secondary currency