![]() ![]() In a direct quotation, the foreign currency is the base currency and the domestic currency is the counter currency. The exchange rate has two components-the base currency and the counter currency. Now that you understand the concept of the direct and indirect quote, let’s look at some other related concepts. Trade Deficits, Savings and Investments.National Income Identity for Open Economy.International Experience of Exchange Rate Systems.Browse more Topics Under Open Economy Macroeconomics Whereas, a lower exchange rate in an indirect quote indicates that the domestic currency is depreciating in value as it is worth a smaller amount of foreign currency. Now, a lower exchange rate in a direct quote implies that the domestic currency is appreciating in value. However, the exchange rates can also be quoted against other countries’ currencies, which is called as cross currency. Since the US dollar (USD) is the most dominant currency, usually, the exchange rates are expressed against the US dollar. The quote is indirect when the price of one unit of domestic currency is expressed in terms of Foreign currency. ![]() The quote is direct when the price of one unit of foreign currency is expressed in terms of the domestic currency. The exchange rate can be quoted directly or indirectly. In financial terms, the exchange rate is the price at which one currency will be exchanged against another currency.
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