Currency Quotes
Reading a foreign exchange quote is simple if you remember two things:
1. The first currency listed is the base currency
2. The value of the base currency is always 1
A currency pair quote is comprised of a bid/ask price expressed in the following format:
EUR/USD: 1.2836 / 1.2839 or EUR/USD: 1.2836/39
The first number in the series represents the bid price, the cost of selling the Euro against the Dollar, or going ‘short' on the Euro.
The second number represents the ask price, the cost of buying the Euro against the dollar, or going ‘long’ on the Euro.
The difference between the ask price and the bid price is called the pip spread.
What is a pip?
A pip (or “percentage in point”) is the smallest unit of measure for any currency. In most currencies, this is the fourth digit after the decimal point and is equal to 1/100th of 1% or .0001. So, using the example above (EUR/USD: 1.2836 1.2839), the spread is 3 pips (39 – 36).
NOTE: For Japanese yen, pips refer to the second digit after the decimal point. This is the only exception among the major currencies.
