RMB vs yuan: understanding the difference

The national currency implies the money issued by a state central bank or any other state monetary institution. The Chinese currency is becoming popular and a more powerful international currency day by day. The most debatable issue in the international economy is due to the policy of artificial undervaluation of Chinese money against the United States dollar, to the extent that China has been gaining an advantage in export prices until 2015. During that period, the Chinese currency received an appreciation of its growing position in the world by the International Monetary Fund.

Before 2010, since it was under strict government control, the Chinese renminbi was never considered an international currency. But now the Standard Chartered Bank forecasts that 28% of international trade from China will be made in RMB in 2020.

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What are exotic currency pairs in the Forex market?

The Forex market is the largest OTC market in the world, according to some estimates it moves almost 5 trillion dollars a day. Specifically, in the last triennial survey of the BIS, you can observe the level of negotiation and distribution among the main currency pairs that are traded in that market. This tells us clearly why it is the largest market in the world. But the fact is that not all the instruments that are traded in this market are the same. Each pair has its own characteristics and advantages and disadvantages.

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Indirect quotation and direct quotation – Forex

What is an indirect quote?

Is the price of a currency pair expressed as amount of foreign currency per unit of domestic currency.

In other words, when an indirect quote is given, the exchange rate is expressed relative to a fixed  amount of the national currency (1 unit),  while the amount of foreign currency is variable.

For example, if we are in the United States, the indirect quote for the Canadian dollar would be 1.17 CAD = 1 USD, so the exchange rate of the indirect quotation is expressed as USD/CAD 1.17 because it is the expression that reports the amount of CAD per unit of USD which is the national currency (for 1 USD we can obtain 1.17 CAD). If we were in Canada the indirect quotation of the US dollar would be 0.85 USD = 1 CAD (CAD/USD 0.85 indicates that for 1 CAD, which is the national currency, we get 0.85 USD). As we can see, in an indirect quote the base currency of the currency pair is the national currency.

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Base Currency and Quote Currency

In this article we will define two basic concepts for trading in Forex: the base currency and the quote currency.

What is the base currency?

The base currency is the first currency listed in a currency pair traded in the Forex market. Sometimes you can also see this term as primary currency (although this term is not very suitable for its meaning in economics). In accounting base currency is the one used to represent all company accounts.

For example, if we have the pair EUR/USD, the euro (EUR) is the base currency and the US dollar (USD) is the quote currency or counter currency. The price given for the pair represents how much is needed of the quote currency to buy one unit of the base currency or, which is the same, how much of the quote currency can be obtained when one unit of base currency is sold.

Forex Currency Pairs – Definition and Quotation

Forex currency pairs

What are Forex currency pairs?

In the Forex market, currencies are traded in pairs. In these pairs each currency has meaning in relation to the other, so always stick together.

The two currencies in a pair are traded against each other. The rate or price at which these currencies are traded is known as the exchange rate. The exchange rate is regularly affected by supply and demand for currencies that make up the pair.

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Indirect quotation and direct quotation in Forex

Indirect quotes and direct quotes in Forex

What is an indirect quote?

Is the price of a currency pair expressed as amount of foreign currency per unit of domestic currency.

In other words, when an indirect quote is given, the exchange rate is expressed relative to a fixed  amount of the national currency (1 unit),  while the amount of foreign currency is variable.

For example, if we are in the United States, the indirect quote for the Canadian dollar would be 1.17 CAD = 1 USD, so the exchange rate of the indirect quotation is expressed as USD/CAD 1.17 because it is the expression that reports the amount of CAD per unit of USD which is the national currency (for 1 USD we can obtain 1.17 CAD). If we were in Canada the indirect quotation of the US dollar would be 0.85 USD = 1 CAD (CAD/USD 0.85 indicates that for 1 CAD, which is the national currency, we get 0.85 USD). As we can see, in an indirect quote the base currency of the currency pair is the national currency.

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