Base currency terms explain Foreign exchange

Television will always appear brush brush printing money scene, in the greedy at the same time, have you ever thought of these money where to go? To know this, you first need to understand what is the base currency.

Base currency

Base money in finance is the amount of money printed by the central bank.The money printed by the central bank in our country will be cut into two large pieces, the deposit reserve and the currency in circulation.

Deposit reserve is a certain percentage of commercial bank deposits in the central bank, used to cope with large withdrawals and liquidation of funds and so on. Currency in circulation, on the other hand, consists of cash held in the hands of the public and deposits held in commercial banks.

It is also known as high-powered money, and for commercial banks it is their old money. If you plant RMB in the spring, you will harvest more RMB in the fall. Under the reserve requirement system, through repeated loans and deposits by commercial banks. It is able to make the money supply, up to several times his own amount.

It is also the basis for the creation of money by the central bank, which can be called the weight of the state. By adjusting it, the central bank controls the money supply in the market. Increase it and the money supply in the market increases. Recycle it and the money supply decreases.

This is one of the important tools of macro-control of the country. Investors can pay attention to economic news to understand the changes in national monetary policy, according to which to form their own judgment on the current state of the market.

In the foreign exchange market, the base currency (Basecurrency) is the first currency in a currency pair, usually located before the slash. It is a way of indicating that you are buying or selling a currency, and is also known as the "base currency" or "trading currency". Its value is used to express the relative value of another currency (the currency of denomination).

It is the unit of currency used for denomination and trading, and its value is relative to the denomination currency. For example, in a currency pair such as EUR/USD, EUR (euro) is the base currency and represents the value of one unit of euro relative to the US dollar. If EUR/USD is trading at 1.20. it means that one euro is worth 1.20 dollars.

It is very important in the Forex Market because it determines the direction and size of the trade. When trading in the Forex market, it will be purchased or sold denominated currency. Understanding its value and trend interpreting forex market prices and making trading decisions is crucial. It is usually the national currency associated with an economy, but its status changes from one currency pair to another.

What does base money consist of

It is an important concept in forex trading. Being the first currency in a transaction, it is also the primary currency in a currency pair. It is used to represent and denominate the price of the currency in a transaction. In the Forex market, a currency pair consists of two currencies, one of which is the base currency and the other is the quote currency.

Leveraged currency: Leveraged currency usually refers to the leverage ratio of funds used by investors or traders. It is used to indicate the exchange rate of one unit of currency against another unit of the quoted currency. For example, if the EUR/USD rate is 1.20, then this means that one euro is equivalent to 1.20 US dollars, where the euro is the base currency.

Common base currencies in forex currency pairs include the US Dollar (USD), the Euro (EUR), the Pound Sterling (GBP), the Australian Dollar (AUD) and so on.

Base Currency and Leveraged Currency

They are two key concepts in forex trading and are used to describe the different roles and functions in Currency Trading.

Basecurrency: is the first currency in a currency pair and usually comes before the slash. It is the base of the transaction and represents the currency you are buying or selling. Its value is used to indicate the value of another currency (denominated currency) value value relative. For example, in a currency pair such as GBP/USD, GBP is the base currency and represents one unit of British Pounds relative to the US Dollar. If GBP/USD is trading at 1.25. it means that the value of one pound sterling is 1.25 US dollars.

Denominated Currency (Quote Currency): The denominated currency is the currency in which the currency in the pair is traded, usually located after the slash. It indicates the value relative to the preceding currency.

The value of the denomination currency is used to calculate the relative value of the front currency value of the purchase or sale. In EUR/USD, the USD is the denomination currency and represents the value of one unit of US Dollar relative to the Euro.

Leveraged Currency: Leveraged Currency usually refers to the percentage of capital leverage used by an investor or trader. This means that a relatively small amount of capital can be borrowed to trade forex in order to increase the size of the trade.

Simply put, if trading with a leverage ratio of 10:1, one only needs to have 10% of the size of the forex trade as margin, while the remaining 90% is in the form of credits provided by the forex dealer. Leverage currency is not a specific currency, but is used to describe the way the capital used Different traders and markets may offer different leverage spreads. 

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.