Editing Exchange rate (section)

==Quotations==
{{main|Currency pair}}

[[Image:South East Asia Exchange Rates (6031878489).jpg|thumb|Exchange rates display in [[Thailand]]]]
There is a market convention that rules the notation used to communicate the fixed and variable currencies in a quotation. For example, in a conversion from EUR to AUD, EUR is the fixed currency, AUD is the variable currency and the exchange rate indicates how many Australian dollars would be paid or received for 1 euro.

In some areas of Europe and in the retail market in the [[United Kingdom]], EUR and GBP are reversed so that GBP is quoted as the fixed currency to the euro. In order to determine which is the fixed currency when neither currency is on the above list (i.e. both are "other"), market convention is to use the fixed currency which gives an exchange rate greater than 1.000. This reduces rounding issues and the need to use excessive numbers of decimal places. There are some exceptions to this rule: for example, the Japanese often quote their currency as the base to other currencies.

Quotation using a country's home currency as the price currency is known as direct quotation or price quotation (from that country's perspective) 
 {{clarify|date=May 2016}} For example, {{Euro|0.8989}} = {{USD|1.00}} in the Eurozone<ref>{{Cite web|url=http://www.inlandrevenue.gov.uk/manuals/cfmmanual/cfm7011.htm|archiveurl=https://web.archive.org/web/20041223100220/http://www.inlandrevenue.gov.uk/manuals/cfmmanual/cfm7011.htm|url-status=dead|title=Understanding foreign exchange: exchange rates|archivedate=December 23, 2004}}</ref> and is used in most countries.

Quotation using a country's home currency as the unit currency{{clarify|date=May 2016}} (for example, {{US$|1.11}} = {{Euro|1.00}} in the Eurozone) is known as indirect quotation or quantity quotation and is used in [[United Kingdom|British]] newspapers; it is also common in [[Australia]], [[New Zealand]] and the Eurozone.

Using direct quotation, if the home currency is strengthening (that is, [[Currency appreciation and depreciation|appreciating]], or becoming more valuable) then the exchange rate number decreases. Conversely, if the foreign currency is strengthening and the home currency is [[depreciation (currency)|depreciating]], the exchange rate number increases.

Market convention from the early 1980s to 2006 was that most currency pairs were quoted to four decimal places for spot transactions and up to six decimal places for forward outrights or swaps. (The fourth decimal place is usually referred to as a "[[Percentage in point|pip]]"). An exception to this was exchange rates with a value of less than 1.000 which were usually quoted to five or six decimal places. Although there is no fixed rule, exchange rates numerically greater than around 20 were usually quoted to three decimal places and exchange rates greater than 80 were quoted to two decimal places. Currencies over 5000 were usually quoted with no decimal places (for example, the former Turkish Lira). e.g. (GBPOMR : 0.765432 -  : 1.4436 - EURJPY : 165.29). In other words, quotes are given with five digits. Where rates are below 1, quotes frequently include five decimal places.<ref>{{cite report|last=Abdulla|first=Mouhamed|title=Understanding Pip Movement in FOREX Trading|url=http://drmoe.org/misc/ForexPip.pdf|date=March 2014|access-date=2014-03-27|archive-date=2020-03-31|archive-url=https://web.archive.org/web/20200331141930/http://drmoe.org/misc/ForexPip.pdf|url-status=dead}}</ref>

In 2005, Barclays Capital broke with convention by quoting spot exchange rates with five or six decimal places on their electronic dealing platform.<ref>{{cite web|url=https://www.finextra.com/newsarticle/13480/barclays-upgrades-efx-platform-with-new-precision-pricing|title=Barclays upgrades eFX platform with new precision pricing|date=7 April 2005|website=Finextra Research}}</ref> The contraction of spreads (the difference between the bid and ask rates) arguably necessitated finer pricing and gave the banks the ability to try to win transactions on multibank trading platforms where all banks may otherwise have been quoting the same price. A number of other banks have since followed this system.{{citation needed|date=July 2021}}