Web Trader MT5
A direct quotation refers to an exchange rate expressed as the number of units of domestic currency needed to buy one unit of a foreign currency. It puts the foreign currency as the fixed base and shows how much local currency that unit costs. This is in contrast to an indirect quotation, which flips the relationship and shows how many units of foreign currency one unit of domestic currency will buy.
Whether a quotation is direct or indirect depends on the perspective of the person or country doing the quoting. For a trader in the United States, a direct quote for the euro would be expressed as the number of US dollars per one euro – for example, 1.08.
This rate would be an indirect quote from a European perspective. Understanding the convention for quoting exchange rates is important because it differs across major currency pairs and market traditions.
Example: When a bank that imports USD from the UK sees a direct quote of 0.79 USD, it means USD costs 79 pence in the UK. But if the pound weakens and the rate hits 0.83, then imports costing dollars have become more expensive – the direct quote has changed, and the cost of doing business has changed, too.
