What is a Currency Cross Pair
Currency Cross Pair, we previously discussed about Symbols and Names of Currencies traded in the forex market but we have never discussed in detail how the process of foreign exchange (forex) is formed.
A long time ago if we wanted to exchange the currency we have into the currency we want then we must first exchange the currency we have into the US Dollar then exchange it into the desired currency.
For example, we have the Pound Sterling (GBP) that we want to exchange into Japan Yen (JPY) so we must first exchange the Pound Sterling (GBP) into US Dollar (USD) then exchange US Dollar (USD) into Japan Yen ( JPY).
With the discovery of Currency Cross Pair, we can bypass the currency exchange that we have into the currency we want through US Dollar (USD) and we can immediately exchange the currency we have into the desired currency. And this is what is called a Currency Cross Pair, for example GBP / JPY, EUR / GBP, or EUR / JPY etc. This understanding has already been discussed here , bro 🙂
How to Calculate Currency Cross Pair
To calculate currency cross is very easy, for example, we want to calculate the Bid and Ask currency value of the cross pair from GBP / JPY.
The thing we need to know is how many Bid / Ask prices for both GBP / USD and USD / JPY pairs.
Let’s say the following is the Bid / Ask referred to.
GBP / USD: 1.5620 (Bid) / 1.5625 (Ask)
USD / JPY: 90.03 (Bid) / 90.23 (Ask)
To calculate Bid GBP / JPY you just multiply the Bid price of GBP / USD by Bid USD / JPY and get 140.62686
As for calculating Ask GBP / JPY you just multiply the Ask price of GBP / USD with the USD / JPY Ask and get 140.98437
GBP / JPY: 140.62686 (Bid) / 140.98437 (Ask)