Definition
Base Currency vs Quote Currency
In a currency pair, the base currency is the first one and is priced in units of the second, the quote currency; the rate shows how much quote currency one unit of base currency buys.
In USDINR = 83, USD is the base and INR is the quote, meaning one dollar buys 83 rupees. When the number rises to 84, the dollar has strengthened and the rupee has weakened.
Market convention fixes which currency is base; the USD is base against most currencies, but EUR and GBP are quoted as base against the dollar. On Indian exchanges (NSE, BSE), currency futures are quoted with the foreign currency as base and INR as quote, so a rising contract price means a depreciating rupee.
Related terms
- USDINRUSDINR is the exchange rate of the US dollar against the Indian rupee, the most-watched currency pair in India and a key barometer of capital flows and import costs.
- Appreciation vs DepreciationAppreciation is a market-driven rise in a currency's value and depreciation a fall, both occurring under a floating regime, as opposed to deliberate revaluation or devaluation.
- Currency Futures on NSECurrency futures on the NSE are standardised, exchange-traded contracts to buy or sell a fixed amount of foreign currency against the rupee on a future date.
- Currency Pair NotationCurrency pairs are written as a six-letter code such as USDINR or EURINR, naming the base currency first and the quote currency second, with the price showing how many units of the quote currency buy one unit of the base.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.