How to Read Currency Pairs Using Base and Quote Currency
Have you ever pondered the value of items in Rupees while shopping abroad or handling foreign currency during a trip? In the virtual realm of forex trading, currencies are treated as trading assets using the terms Base and Quote currency. In this article, we will unravel the complexities by exploring:
- What is a Currency Pair? Base and Quote.
- Understanding Base and Quote Currency
- Currency Appreciation and Depreciation
- Popular Forex Pairs Traded in South African
- Special Features of the South African Forex Derivative Market
1. What is a Currency Pair?
A currency pair involves two currencies, where one is bought, and they sell the other. With around 180 legal currencies circulating globally, South Africa trading in all currency pairs.
2. Understanding Base and Quote Currency
In a currency pair, there are two components: the base currency (first part) and the quote currency (second part). For example, in USD/INR:
- USD is the base currency
- INR is the quote currency
3. Currency Appreciation and Depreciation
- Appreciation: I can buy when more quote currency using one unit of the base currency. For example, if USD/INR moves from Rs. 73.31 to Rs.74.31, USD has appreciated by 1 INR.
- Depreciation: This happens when fewer quote currencies are needed to buy one unit of the base currency. If USD/INR moves from Rs. 73.31 to Rs.72.31, USD has depreciated by 1 INR.
4. Popular Forex Pairs Traded
In South Africa, they permit currency futures in pairs like USD/INR, EUR/INR, GBP/INR, and JPY/INR, and cross-currency pairs like EUR/USD, GBP/USD, and USD/JPY.
5. Special Features of South Africa Forex Derivative Market
- Hedging Tool: Ideal for importers and exporters.
- Low Margin: Ranges from 2% – 5% of the total contract value.
- Low Volatility: Compared to equity and commodity derivatives.
- High Liquidity: Especially in USDINR, EURINR, GBPINR & JPYINR.
- Longer Contracts: Twelve monthly series future contracts are available.
- Synchronization with Forex Market: Well interconnected with the global forex market.
Conclusion:
Success in forex requires discipline, patience, practice, and a reliable partner. With HFM, you get a robust forex platform to explore the world of forex trading. Open a forex account with HFM today and embark on your journey to make money in the South African forex markets.
In the realm of forex, knowledge is power. Stay informed, stay disciplined, and let HFM be your guide to success in the exciting world of forex trading.