DEFINITION of European Terms

European terms is an alternative to American terms for foreign exchange quotation. Under European terms, the quoting of the quantity of a specific currency per one U.S. dollar has been a market practice for most the past 60 years or more. In other words, it is the amount of foreign currency that one unit of the domestic currency can buy.

BREAKING DOWN European Terms

For example, assume there is a bid quote of EUR 1.3446/USD, and an ask quote of EUR 1.3448/USD. From the United States perspective, these quotes are given in European terms. Although the bid and ask quotes given here are in European terms, the bid and ask quotes in American terms will be reversed.

Globally, the base currency generally used to quote a currency's value has been the U.S. dollar. Termed European terms, this describes a scenario whenever a currency's value is quoted; it is quoted in terms of the number of units of currency equal to one U.S. dollar.

Example of European Terms

If a trader in Zurich, whose home currency is the Swiss franc (CHF), were to request a quote from an Oslo-based trader on the Norwegian krone (NOK), the Norwegian trader would quote the value of the NOK against the USD, not the CHF.

This results in most currencies are quoted per U.S. dollar.