What is an Exchange Rate/ Direct quote & Indirect quote?

What is an Exchange Rate/ Direct quote & Indirect quote?

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Created By Admin Last Updated Wed, 26-Aug-2020

Exchange Rate

A rate at which one currency can be exchanged with the other. It is a rate at which one currency expressed in terms of the other. It is a rate at which a currency can be bought or sold.

What do you mean by Direct Quote?                  

  • In the above-quoted exchange rate:
  • The quote is given for 1 unit of $.
  • In this given quote, $ behaves like a commodity.
  • For an entity in India, $ is a foreign currency.
  • The given quote is for 1 unit of foreign currency.
  • This is a Direct Quote.
  • In a Direct Quote, 1 unit of foreign currency is expressed in terms of local currency.

What do you mean by Indirect Quote?

  • In the above-quoted exchange rate:
  • The quote is given for 1 unit of `.
  • In this given quote` behaves like a commodity.
  • For an entity in India` is a local currency.
  • The given quote is for 1 unit of local
  • This is an Indirect Quote.
  • In an Indirect Quote, 1 unit of local currency is expressed in terms of foreign currency.

Note:

In order to classify a given Exchange Rate as Direct Quote or Indirect Quote one of the currencies in the quote must be the local currency.