Lesson 1 of 5 · 12 min
Building a cross-rate from two quotes
Treat every quote as a fraction, price currency over base currency, and chain two quotes so the common currency cancels; sometimes one quote must be inverted first.
In short
- A cross-rate is the exchange rate between two currencies, found from each one's quote against a third currency (usually the US dollar).
- Read a quote like a fraction: USD/EUR = 1.0850 means USD 1.0850 per EUR 1. The price currency is on top, the base currency below.
- Multiply when the common currency sits on top in one quote and at the bottom in the other, so it cancels: SEK/USD × USD/EUR = SEK/EUR.
- If the common currency is in the same position in both quotes, invert one of them first (equivalently, divide one quote by the other).
- Most rates are quoted to four decimals; yen rates are quoted to two.
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