What Is a Currency Quote?
Currency quote (exchange rate quote, financial quote) is the numerical value expressing the worth of one freely convertible currency against another at a specific moment. The term “quote” originates from French “coter,” meaning to number or mark.
Why Are Currency Quotes Needed on Financial Markets?
On the forex market, a currency quote sets the price of currencies (as well as stocks, commodities, and other assets on the stock market) at which a seller is willing to sell a specific volume of the asset at that moment. Typically, a currency quote is a variable, constantly changing value.
A currency quote or exchange rate for a currency pair shows the value of one currency in units of another. For example, if the euro rate is 1.3408 US dollars, “1.3408” is the quote for the euro/dollar pair, meaning one euro can be exchanged for 1.3408 dollars.
Quotes form based on economic and political factors like central bank interest rates, inflation levels, and political stability. Incoming news adjusts quotes in real time, visible on the asset’s chart.
The term exchange rate sometimes refers to an averaged value set by central banks for public trading. These rates appear in exchange offices and banks in Moscow and other cities worldwide. However, in real-time exchange trading, prices always fluctuate.
Types of Quotes
Quote classification depends on the asset. In finance, key types include:
- Currency quotes – value of one currency in units of another. Example: Forex currency pairs.
- Precious metals rates – price of a metal volume in currency units. Example: XAU/USD – troy ounce of gold in dollars.
- Oil quotes – barrel of oil price in dollars. Example: Brent quotes – Brent crude oil barrel in dollars.
- Stock, bond, security, futures quotes – price of financial instruments in relevant currency units.
On the Forex market, three main quote types are used:
- Direct quote – any currency against the US dollar. Examples: EUR/USD, GBP/USD, AUD/USD.
- Indirect quote – US dollar against any other currency. Examples: USD/CHF, USD/JPY, USD/RUB.
- Cross rate – value of one currency against another based on their rates to the US dollar. Examples: GBP/JPY, EUR/GBP, EUR/CAD.
On stock markets, prices form purely by investor supply and demand. Currency rates for buying stocks, futures, or commodities influence indirectly.
How to Check Currency Quotes?
To view a required currency rate, use online services providing real-time Forex pair quotes. Links to such services are listed above.
You can also check quotes in the MetaTrader terminal by opening the “Market Watch” window, showing bid and ask prices for all available pairs.
Note that on Forex, each quote has two values: bid (buy) price and ask (sell) price. The difference is the spread, varying by broker.
Old and New Pips in Currency Quotes
Trading forums often use jargon like old and new pips, confusing beginners.
Old pips denote the minimum price change for brokers with 4 decimal places; new pips for 5 decimal places.
Four- and five-digit quotes differ by broker systems. A four-digit broker shows EUR/USD as 1.3367; five-digit as 1.33670. Mathematically, they equal: 1.3367 = 1.33670.
Thus:
- 1 old pip (4 digits) = 0.0001
- 1 new pip (5 digits) = 0.00001
FAQ
What is the difference between bid and ask in a currency quote?
Bid is the price to sell the base currency; ask is the price to buy it. The gap is the spread, set by the broker.
What are direct, indirect, and cross quotes?
Direct: currency vs USD (EUR/USD). Indirect: USD vs currency (USD/JPY). Cross: non-USD pairs via USD rates (EUR/GBP).
How do old and new pips differ?
Old pips use 4 decimals (0.0001); new use 5 (0.00001), allowing precise pricing on modern platforms.
