DEFINITION of 'Counter Currency'

The counter currency is the currency used as the reference or second currency in a currency pair. When viewing an ISO currency code the counter currency is listed after the base currency, and is separated with a slash. Major currencies, such as the euro and U.S. dollar, are more likely to be the base currency in a currency pair.

Counter currency is often referred to as the secondary currency or the quote currency.

BREAKING DOWN 'Counter Currency'

It is important to understand the structure of the currency pair in order to understand forex trading. In the currency pair USD/EUR the euro (EUR) is considered the counter currency. In the pair, units of counter currency are per unit of base currency. However, the conventional, or industry norm for quoting euro against the U.S. dollar is the other way around - EUR/USD - so the U.S. dollar is the counter currency. 

When an investor buys, or goes long on, a currency pair, they are selling the counter currency. On the other hand of they are shorting a currency pair they are buying the counter currency. 

 

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