Question about the base / foreign currency

[kc]

Hi All,

I am very confused with the notation of the domestic and foreign currency.
I understand that e.g. EURCAD = 1.46, which means CAD per EUR(CAD/EUR) i.e. 1 EUR = 1.46 CAD
(REF Comment #10, https://forum.bionicturtle.com/threads/p1-t3-22-17-covered-and-uncovered-interest-rate-parity.24150/ ).

But when it comes to the EUR and USD, seems this logic doesn't hold.
In the GARP or some websites, for example, https://financetrain.com/interpreting-forward-exchange-rate-quotes,
when it comes to the EUR / USD, it is always referred to as 1 EUR to xx USD.

How is it so? Is EUR and USD kind of a special exception here?

Thank you so much.

 

[KEver3617]

In both cases you have quoted currency first and reference currency second, I don't see an inconsistency

 

[David Harper CFA FRM]

Hi @chankiki23893 Personally I do not use foreign/domestic semantics because I find them confusing; e.g., your title mention of "base/foreign" is problematic to me. Rather, FX questions are always BASEQUOTE (aka, BASE/QUOTE) such that the first current ticker is the base, so it's always N quote currency units per 1.0 unit of base currency. After that, I think the key misunderstanding is due to the fact that the major currencies have a rank by mere convention, see https://en.wikipedia.org/wiki/Currency_pair i.e.,

"Although there is no standards-setting body or ruling organization, the established priority ranking of the major currencies is:

1. euro
2. pound sterling
3. Australian dollar
4. United States dollar
5. Canadian dollar
6. Swiss franc
7. Japanese yen"

So I say forget about domestic/foreign (because that's really relative to location, right!) and observe that the Euro (EUR) will always be the base because it's ranked first. The default is always EUR/GBP, EUR/AUD, EUR/USD, EUR/CAD, etc. And, for example, the default will be USD/CAD not CAD/USD because USD ranks above CAD (meanwhile either can be foreign depending on your frame of reference). I hope that's helpful!