In this example, it is USD.Ĭheck the order of the currencies. You want to calculate the EUR/GBP cross rate.įind your common currency - the currency that occurs in both pairs.You also know the dollar-pound rate, and it is 0.8 USD/GBP.Let's say you know the euro-dollar rate, and it is 1.1 EUR/USD.Let's see how to use it in practice with numbers. Now that you know the cross currency conversion formula. Enter the quotations and we will take of care of calculating the cross rates properly. For example, "A" could be EUR, "B" - GBP, and "C" - USD. As you can see the letter "C" is present in both pairs and represents the common currency. The capital letters "A", "B", and "C" each represent different currencies. Alternatively, you can use our calculator instead.Once you've done this, line your quotes up and do the same as before, diving the first rate by the second: In other words, you need to find the reciprocal of a fraction: `1 ÷ USD/EUR = EUR/USD`. In simple terms, you need to "flip" one of the pairs. You want the common currency - USD - to be the denominator in both quotes. This time you have quotes for USD/EUR and GBP/USD. Let's stay with the currencies from the previous example. Things are a little bit trickier when you have quotes in which the order of currencies is different. You can do this by simply diving the first rate by the second: `EUR/USD ÷ GBP/USD = EUR/GPB`.īecause the denominator, a common currency (in this case the dollar), is the same, you can cross-cancel it. You want to find out the EUR/GBP cross rate. It means that in both quotes the common currency is the denominator.įor example, you have quotes for EUR/USD (euro/dollar) and GBP/USD (pound/dollar). You have two foreign exchange quotes where the order of the currencies is the same. It depends on the quotation given - there are two cases: The answer here is going to be unsatisfying - it is the common answer in the world of finance: "it depends". Now that you know the what and the why, the last important question is how. In any case, you should probably know what deal you are getting before making any transactions - calculating cross currency exchange rates tells you exactly that. It does not matter whether you are on holiday □, visiting your local currency exchange, or are trading on Forex □, some currency combinations are hard to find and rarely traded directly. Most of the time, the main reason you calculate the cross rate is because your current situation means that it is easier to exchange your money twice than to exchange it directly. The one that directly compares the two currencies, omitting the third one. The point of calculating the cross rate is to find the exchange rate between two currencies when you only know the individual exchange rates between those two currencies and a third common currency (for example the national currency of the country you are in).
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