May, 2012 5:06 AM
Cross Currencies
A pair of currencies traded that does not include the US dollar. One foreign currency is traded for another without having to first exchange the currencies into US dollars.
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The five “major” currencies are the US Dollar (USD), the Euro (EUR), the Swiss Franc (CHF), the British Pound (GBP) and the Japanese Yen (JPY). These currencies are usually quoted in terms of the base currency USD, such as USDEUR.
When these currencies are quoted in terms of each other rather than the USD, such as EUR/JPY (or EURJPY), it’s called a “cross” rate. Cross currencies are less liquid and therefore usually attract a higher spread than the “majors”.
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