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  • The Financial Encyclopedia
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Forex

  Forex   |   Terms
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  • May 13, 2021
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Base Currency

The first currency in a currency pair. It is the basis for the buy or the sell: if an investor is buying USD/EUR, this indicates that he is buying the base currency and simultaneously selling the other currency i.e., the quote currency. In other words, being long a currency pair means a position in which the base currency is long (purchased) and paid for by shorting (selling) the counter currency. A price quote shows how much of the quote currency is necessary to sell or purchase one unit of the base currency. The base currency is always equal to one, while the quote currency is the amount required to buy one unit of the base currency. The currency pair EUR/USD 1.3245 means that for every euro, a trader will receive 1.3245 U.S. dollars.

Conventionally, USD is used as the base currency in the FOREX market.


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