Cross Rate

The speaker discusses the concept of cross rates in the forex market.  He suggests that a cross rate is needed in a currency pair which does not include the US dollar.  Since US dollars are the main currency in the forex market, most rates are derived using the dollar quote; however, there are situations where this is not the case; hence the need for a cross rate.  CHF/JPY, EUR/GBP, EUR/JPY, and the EUR/CHF are common examples where this the case.  Therefore, to obtain a cross rate for the EUR/JPY, dollars are bought at the Japanese Yen rate and using these dollars, Euro's are bought at the Eurodollar rate.  Through common arithmetic, EUR/JPY is produced.  USD/JPY * EUR/USD

The speaker discusses the cross exchange rate and explains how to calculate the rate given a few variable.  He also discusses how to read the bid and ask given a quote.

The cross rate is the currency exchange rate between two currencies, where neither of the currencies are of the country in which the exchange rate is given. An example of a cross rate would be the exchange rate of the U.S. Dollar and Euro, quoted in a finance journal from Canada. Many foreign exchange dealers have created profitable arbitrage trading techniques to profit off the cross rate between the major currencies. Cross rates are listed in all of the major news publications, such as the Wall Street Journal, Bloomberg, and the New York Times.