Free UNK-1 Essay Sample
International trading requires inter currency calculations before quoting the rates. Consequently, international trading involves two currencies; domestic currency, or currency of exporting country and foreign currency, or currency of importing country. Moreover, there are two quoting systems, direct quote and indirect quote. Both are completely different and are separately defined below.
Direct quote has been appropriated or calculated as defined, the foreign currency as fixed unit and the local currency as variable unit. For instance, in Pakistan the direct quote for United States would be 85.5 Pakistani rupees per United States dollar. Conversely, in United States the direct quote for Pakistan would be 0.01 United States cents per Pakistani rupees.
Indirect quote has been appropriated or calculated as defined, the foreign currency as variable unit and local currency as fixed unit. For instance, in Pakistan the indirect quote for United States would be 0.01 United States cents per Pakistani rupees. Conversely, in United States the indirect quote for Pakistan would be 85.5 Pakistani rupees per United States dollar.
Example of Direct Quote Between the U.S. dollar and the Mexican Peso
In this example United States is designated as the home country where 1.00 MXN = 0.08 USD. So, United States direct quote for Mexican peso would be 0.08 United States cents per Mexican peso.
Example of an Indirect Quote Between the Japanese Yen and the Chinese Renminbi (yuan)
In this example China is designated as the home country where 1.00 CNY = 12.65 JPY. So, China's indirect quote for Japanese yen would be 12.65 Japanese yen per China renminbi (yuan).