Is the stronger currency always the base currency?

Is the stronger currency always the base currency?

Is the stronger currency always the base currency? - Căutare Google

thanks for your help!

Base currency and cross-currency [B]no longer[/B] have anything to do with the relative strength of the two currencies involved (although, originally, before the introduction of the euro, that was generally the case).

Rather, by generally agreed upon rules, there is a “heirarchy” of currencies, which is never altered, even as various currencies gain or lose strength relative to other currencies.

You may have noticed that the euro is always the base currency in every euro-pairing, and the yen is always the cross-currency in every yen-pairing, etc.

Here is a portion of the Wikipedia article titled [I]Currency Pair[/I]:

Base currency

The rules for formulating standard currency pair notations result from accepted priorities attributed to each currency.

From its inception in 1999 and as stipulated by the European Central Bank, the euro has first precedence as a base currency. Therefore, all currency pairs involving it should use it as their base, listed first. For example, the US dollar and euro exchange rate is identified as EUR/USD.

Although there is no standards setting body or ruling organization, the established priority ranking of the major currencies is:

euro
pound sterling
Australian dollar
New Zealand dollar
United States dollar
Canadian dollar
Swiss franc
Japanese Yen

Historically, this was established by a ranking according to the relative values of the currencies with respect to each other, but the introduction of the euro and other market factors have broken the original price rankings.

Other currencies (the Minors) are generally quoted against one of the major currencies.

The term base currency in the foreign exchange field is also used as the accounting currency by banks, and is usually the domestic currency. For example, a British bank may use GBP as a base currency for accounting, because all profits and losses are converted to the sterling. If a EUR/USD position is closed out with a profit in USD by a British bank, then the rate-to-base will be expressed as a GBP/USD rate. This ambiguity leads many market participants to use the expressions currency 1 (CCY1) and currency 2 (CCY2), where one unit of CCY1 equals the quoted number of units of CCY2.

For the complete article, go to — Currency pair - Wikipedia, the free encyclopedia

thank you for your much more comprehensive answer!

Glad to help.

The 8 individual currencies listed in the Wikipedia article — often referred to as the world’s “major” currencies — can be combined into 28 different currency[I] pairs[/I]. And these pairs are sometimes grouped and labeled differently by different writers.

For example, here are two web-pages listing various pairings of the 8 major currencies, together with several “exotic pairs”. As you will see, when you compare these two lists, there isn’t universal agreement on how to classify various pairings.

Forex Currency Pairs Basics - Majors, Minors, Exotics

this site lists currency pairs as: major currency pairs, currency crosses, and exotic currency pairs

Forex Currency Pairs: Majors, Minors and Crosses

this site lists currency pairs as: major pairs, minor pairs, major crosses, and minor crosses --- 
   and then lists a large number of [I]individual exotic currencies[/I] by geographical region

You will often read that “exotic pairs” are made up of non-major currencies paired against either the EUR or the USD. An example would be USD/ZAR (U.S. dollar / South African rand). In these pairings, either the EUR or the USD would be the base currency, according to the “heirarchy” given in the Wikipedia article.

But, this rather simplistic definition doesn’t address the hundreds of possible pairings of one exotic currency against another. For example, the Singapore dollar paired with the Hong Kong dollar. Would that be SGD/HKD or HKD/SGD? You’re likely to see it listed both ways.

Somewhere there must be a more complete “heirarchy” of currencies (than the one given in the Wikipedia article), but I haven’t seen it. Maybe someone on this forum can offer some additional info.