Hello again!! Good Day to Everyone,
I am happy about this, that- I can continue my forex article. For the people, who just got here today, this is my successive article on forex learning. This one is the "Third"one. Here the previous ones-
1.https://steemit.com/forex/@shuvomahfuz/learning-forex-a-to-z-of-forex
2.https://steemit.com/forex/@shuvomahfuz/learning-forex-a-to-z-of-forex-episode-2
Well, today's topic is currency pair. What is it? How you will understand and the meaning of the each pairs.
The share market rule is that, any share price will be determined against the country's currency. For example, the share market of USA is determined by the Dollar price of a share.
But it is impossible to determine the value of a country's currency in Forex market like this. Only Euro or Dollar can have no value. For example, with 1 dollar,It is possible to get only 0.85 euros or 1.31 Australian dollars. Again if you talk about Japanese Yen, then you get 110 yen with 1 dollar.
So, what is the dollar value? People of different countries trade in Forex market, at which price they will buy dollars?
That's why all the Forex markets are traded through currency pairs
For example, EUR / USD, a currency pair. Currently EUR 1 / 1.18. It means you get $ 1.18 with 1 euro. Oh, forgot to say, USD = United States Dollar or American Dollar. Easy to say, which we know as dollars.
Let's look at some more currency pairs:
Image Source
1 AUD / USD = 0.77, that means you get $ 0.77 US Dollar with 1 Australian Dollar.
1 GBP / USD = 1.34 , that means you get 1.34 USD with 1 pound.
1 NZD / USD = 0.70, this means that with 1 New Zealand dollar you get 0.70 US dollars.
1 USD / JPY = 109.91, that means you get 109.91 Japanese Yen with 1 dollar.
1 EUR / JPY = 129.74, that means you get 129.74 Japanese Yen with 1 Euro.
Now you understand about the currency pair?
Bro, if I write with a little change? I mean, I wrote that, 1 EUR / USD = 1.18 . If I write USD / EUR rather than writing EUR / USD , there would be a problem?
Of course not. But remember, the first currency of the currency pair, indicates the next currency you will get.
1 EUR / USD = 1.18 . It means you get $ 1.18 with 1 euro.Then, 1 USD / EUR will indicate how much you USD will get for 1 Euro. The answer will be, exactly the opposite, 1 / 1.18 or 0.85 .
Let's have a small test, whether you can learn anything or not. You can take the answer below of this post. Be careful, do not steal the answer!!
1 EUR / GPB = 0.88, what does this mean? You can get the help from above, also, you can take the answer from the bottom.
One question still remains, why I am taking so many numbers after decimal? For example, why write 1 EUR / USD = 1.17913? 1.18 is written only. Before this point, I wrote in round figure for easy to understand. You will see, 5-6 numbers after a decimal in a Forex market.In the stock market, there is no decimal complication, all the shares are worth $ 20, 60 or maybe 1200 rupees. OR have only few after them. No one has ever heard of the share price of 20.2543. Why this is so complicated?
Firstly, the pair of two currency is indicating the ration between these two. For example, EUR / USD means, how much money will be made with 1 euro. We do not calculate how many shares of LafargeHolcim Cement will get for the share of another company in the stock market. And so, the share price of most shares in our country is in old numbers or round numbers, but some shares are worth tenths.
At the Forex market, after the decimal 4th/5th number is taken up, because the Forex market is generally move after that point rather than total change in decimal point. So it's been standardized.
Currency Rate
EUR / USD 1.17950
USD / JPY 109.962
GBP / USD 1.34281
USD / CHF 0.98438
USD / CAD 1.29498
EUR / JPY 129.699
AUD / USD 0.76550
As you can see, all currency pairs are showing 3-6 numbers after the decimal.
[Puzzle 1 Answer: 1 EUR / GBP = 0.88 This means you get 0.88 pounds with 1 euro]
Well this is all for today! I am not going to put any more in it. Let's talk about the later part in the next one. Feel free to leave a comment, if you have any queries. I will try my best to give you the desired answer.
