Forex Dictionary Terms

Base Currency

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Definition – What does Base Currency mean?

The base currency is the first currency to appear in a currency pair. In currency trading, all currencies are paired. The base currency appears first (on the left) and the quote currency is displayed next (on the right). This pair is then given a value that represents how many units of the quote currency are required to purchase one unit of the base currency. This value also as the exchange rate between the two currencies.

The base currency is also referred to as the primary currency in a currency pair.

ForexTerms explains Base Currency

For example, the euro and the U.S. dollar create a currency pair EUR/USD with a value of 1.3047. The EUR is the base currency and the USD is the quote currency. The value beside the two (1.3047) tells a forex trader that it takes 1.3047 U.S. dollars to buy one euro.

The same system is used by banks and money exchangers but the base currency is usually assumed to be the domestic currency, so only the quote currency and value (exchange rate) is displayed. In this case, it would say USD 1.3047 at a European bank where customers can convert Euros into U.S. dollars.

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