Base Currency

The speaker provides an overview on the differences of the base currency and the quote currency.  He mentions that all the transactions on a pair are done through the base currency and all the profits are paid out in US dollars only.  Using a few examples, he illustrates how to convert profits back into US dollars even if they are made in foreign currencies. 

The speaker provides an overview of a currency pair and specifically discusses the base currency.  The first currency in the currency pair is the base currency.  The USD, GBP, and EUR represent the base currency in the majority of currency pairs.

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.