📖 Financial Lexicon Term
What is Base Currency?
The first currency in a currency pair. In EUR/USD, the euro is the base currency. It represents how much of the quote currency is needed to buy one unit of the base.
Detailed Explanation
In any foreign exchange quote, currencies are evaluated in pairs. The Base Currency is the transaction reference currency, representing exactly one unit of value. The exchange rate shows how much of the second currency (the quote currency) must be paid to buy or receive one unit of this base currency.
💡 Practical Trading Example
In the EUR/USD pair, EUR is the base currency. If the rate is 1.0900, it means 1.0900 US Dollars are needed to buy exactly 1 Euro.