Base Currency Definition

What is the base currency?

The base currency is the first currency quoted in a currency pair.  The base currency is referred to as the parent currency and exchange rates are quoted in per unit of the base currency.  The base currency is the more valuable currency.  Therefore in the EUR/USD currency pair, the Euro is more valuable than the Dollar, so it is the base currency.  The base currency is also known as the accounting currency or domestic currency.  So even though large banks may trade a number of currency pairs, if their base currency is Euros, all profits and losses will be converted to Euros. Currently the Euro is the dominant base currency on the forex market.


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