Indirect Quote

Loading the player...

What is an 'Indirect Quote'

A currency quotation in the foreign exchange markets that expresses the amount of foreign currency required to buy or sell one unit of the domestic currency. An indirect quote is also known as a “quantity quotation,” since it expresses the quantity of foreign currency required to buy units of the domestic currency. In other words, the domestic currency is the base currency in an indirect quote, while the foreign currency is the counter currency. An indirect quote is the opposite or reciprocal of a direct quote, also known as a “price quotation,” since it expresses the price of one unit of a foreign currency in terms of the domestic currency.

BREAKING DOWN 'Indirect Quote'

As the US dollar is the dominant currency in global foreign exchange markets, the convention is to generally use direct quotes that have the US dollar as the base currency and other currencies – like the Canadian dollar, Japanese yen and Indian rupee – as the counter currency. Exceptions to this rule are the euro and Commonwealth currencies like the British pound, Australian dollar and New Zealand dollar, which are typically quoted in indirect form (for example GBP 1 = USD 1.50).

Consider the example of the Canadian dollar (C$), which we assume is trading at 1.0400 to the US dollar. In Canada, the indirect form of this quote would be C$1 = US$0.9615 (i.e. 1/1.0400).

In the direct quote, a lower exchange rate implies that the domestic currency is appreciating or becoming stronger, since the price of the foreign currency is falling. Conversely, for an indirect quote, a lower exchange rate implies that the domestic currency is depreciating or becoming weaker, since it is worth a smaller amount of foreign currency. Continuing with the above example, if the Canadian dollar (direct) quotation now changes to US$1 = C$1.0600, the indirect quote would be C$1 = US$ 0.9434 = 94.34 US cents.

What about cross-currency rates, which express the price of one currency in terms of a currency other than the US dollar? A trader or investors should first ascertain which type of quotation is being used – direct or indirect – to price the cross-rate accurately.

For example, if the Japanese yen is quoted at US$1 = JPY 100, and US$1 = C$1.0600, what is the price of yen in Canadian dollars (both direct and indirect quotations)?

In Canada, the indirect quotation would be: C$1 = US$0.9434 x 100 (yen per USD) = 94.34 yen.

The direct quotation would be: JPY 1 = C$1.0600/100 = C$ 0.0106.

RELATED TERMS
  1. Exchange Rate

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

    The second currency quoted in a currency pair in forex. In a ...
  3. European Currency Quotation

    An indirect quotation in the foreign exchange markets whereby ...
  4. American Currency Quotation

    A direct quotation in the foreign exchange markets whereby the ...
  5. Direct Quote

    A foreign exchange rate quoted as the domestic currency per unit ...
  6. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
Related Articles
  1. Trading

    What is an Indirect Quote?

    An indirect quote expresses the amount of foreign currency required to buy or sell one unit of the domestic currency in the foreign exchange markets.
  2. Trading

    Understanding The Spread in Retail Currency Exchange Rates

    Understanding how exchange rates are calculated and shopping around for the best rates may mitigate the effect of wide spreads in the retail forex market.
  3. Trading

    What is a Direct Quote?

    A direct quote uses variable amounts of the home country’s currency to compare to a fixed amount of a foreign currency.
  4. Trading

    Understand the Indirect Effects of Exchange Rates

    Exchange rates have a tremendous influence on the economy. Exchange rates can indirectly affect many of the most important aspects of our lives.
  5. Trading

    How Do You Make Money Trading Money?

    Making money in the foreign exchange market is a speculative process. You are betting that the value of one currency will increase relative to another.
  6. Markets

    What Happens in a Currency Crisis?

    A currency crisis comes from a decline in the value of a country’s currency.
  7. Investing

    Explaining Foreign Exchange Risk

    Foreign exchange risk is the chance that an investment’s value will decrease due to changes in currency exchange rates.
  8. Markets

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
  9. Trading

    4 Of The Most Popular Traded Currencies

    Every day, trillions of dollars trade in the forex market. Here are a few of the most popular currencies, and some characteristics for each.
  10. Trading

    The Forex Market: Who Trades Currency And Why

    The forex market has a lot of unique attributes that may come as a surprise for new traders.
RELATED FAQS
  1. Why isn't the EUR/USD currency pair quoted as USD/EUR?

    In a currency pair, the first currency in the pair is called the base currency and the second is called the quote currency. ... Read Answer >>
  2. Why is currency always quoted in pairs?

    When reading currency quotes, you have probably noticed that there is only a single quote for a pair of currencies. Currency ... Read Answer >>
  3. How can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
  4. Why is the U.S. dollar shown on the top of some currency pairs and on the bottom ...

    All currencies are traded in pairs. The first currency in the pair is called the base currency while the second is called ... Read Answer >>
  5. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
  6. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center