The FX market is the largest market in the world with more than the equivalent of $2 trillion being traded each day. This ensures very liquid markets for the major currencies. The largest currencies traded are the US Dollar (USD or $), the Euro (EUR or €) and the Japanese Yen (JPY or ¥).
Depending on where you are in the world, your home currency is your base currency. Any currency pair that does not include your home currency is called a cross rate. Since I am in the USA, my base currency is the USD. If I wanted to look at JPY/EUR, that would be a cross rate since it does not contain my base currency.
Most currency quotes are quoted in what is referred to as a “Spot Rate.” This simply refers to the settlement convention. It means that the currency transaction will settle in two business days. Most currencies trades settle spot. The major exception is the Canadian Dollar (CAD) which settles “Tom” which means tomorrow or one business day. “Reg Settle” would be three business days. Cash settle is same day settlement. The market convention is to refer to these in chronological order as T+0 (Cash), T+1 (Tom), T+2 (Spot), T+3 (Reg) where T stands for the trade date.
Comment Preview