Cross Currency

AAA

DEFINITION of 'Cross Currency'

A pair of currencies traded in forex that does not include the U.S. dollar. One foreign currency is traded for another without having to first exchange the currencies into American dollars.

BREAKING DOWN 'Cross Currency'

Historically, an individual who wished to exchange a sum of money into a different currency would be required to first convert that money into U.S dollars, and then convert it into the desired currency; cross currencies help individuals and traders bypass this step. The GBP/JPY cross, for example, was invented to help individuals in England and Japan who wanted to convert their money directly without having to first convert it into U.S dollars.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Reciprocal Currency

    In the foreign exchange market, a currency pair that involves ...
  3. Major Pairs

    The four forex pairs which are considered to be the most heavily ...
  4. Cross-Currency Transaction

    A cross-currency transaction is one which involves the simultaneous ...
  5. Foreign Currency Effects

    The gain or loss on foreign investments due to changes in the ...
  6. Forex - FX

    The market in which currencies are traded. The forex market is ...
Related Articles
  1. Options & Futures

    A Primer On The Forex Market

    Moving from equities to currencies requires you to adjust how you interpret quotes, margin, spreads and rollovers.
  2. Forex Education

    The Forex Three-Session System

    Market hours for Tokyo, London and New York determine volatility peaks. Find out why.
  3. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  4. Forex Education

    Profiting From Carry Trade Candidates

    Capitalize on the yield of the interest rate differential by using flags and pennants.
  5. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  6. Forex Education

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
  7. Forex Education

    Forex: Identifying Trending And Range-Bound Currencies

    Gain a trading edge by learning how macroeconomic forces play out differently for various pairs in the forex market.
  8. Forex Education

    Make The Currency Cross Your Boss

    Tap into a world of possibilities by going beyond the simple pro- or anti-dollar trade.
  9. Forex Education

    Forex: How To Scalp Fundamentally

    Learn why event-driven scalping in the currency market involves balancing fundamentals with technicals.
  10. Forex Education

    Forex Tutorial: The Forex Market

    In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market.
RELATED FAQS
  1. How can I trade in cross currency pairs if my forex account is denominated in U.S. ...

    The forex market allows individuals to trade on nearly all of the currencies in the world. However, most of the trading is ... Read Full Answer >>
  2. What are the goals of covered interest arbitrage?

    The goals of covered interest arbitrage include enabling investors to trade volatile currency pairs without risk as well ... Read Full Answer >>
  3. Where did the term 'pip' in currency exchange come from?

    The term pip is an acronym for percentage in point or price interest point. It measures a unit of change within a pair of ... Read Full Answer >>
  4. How do changes in national interest rates affect a currency's value and exchange ...

    All other factors being equal, higher interest rates in a country increase the value of that country's currency relative ... Read Full Answer >>
  5. What is the difference between pips, points, and ticks?

    Point, tick and pip are terms used to describe price changes in the stock market and other markets. While traders and analysts ... Read Full Answer >>
  6. How does inflation affect the exchange rate between two nations?

    The rate of inflation in a country can have a major impact on the value of its currency and the rates of foreign exchange ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!