ABSTRACT
An exchange rate is the number of units of a given currency that can be purchased for one unit of another currency. It is a common practice in world currency markets to use the indirect quotation, which is quoting all exchange rates (except for the British pound) per U.S. dollar. The Financial Times foreign exchange data for May 1, 2013, for example, shows the quotation for the Canadian dollar as being 1.01 per one U.S. dollar. Direct quotation is the expression of the number of U.S. dollars required to buy one unit of foreign currency ( Table 10.1 ). The direct U.S. dollar quotation on May 1, 2013, for the Canadian dollar was U.S. $0.99. Although it is common for foreign currency markets around the world to quote rates in U.S. dollars, some traders state the price of other currencies in terms of the dealer’s home currency (cross rates), for example, Swiss francs against Japanese yen, Hong Kong dollar against Colombian pesos, and so on.
