Are exchange rates transitive?

Under the No Arbitrage Principle of quantitative finance, this situation is not permitted in real markets and so currency rates are transitive.

What gives the units of currency of domestic country per unit of a foreign currency?

direct quote
A direct quote is a currency pair quote where the foreign currency is expressed in per-unit terms of the domestic currency. A direct quote gives you the quantity of local currency needed to purchase one unit of foreign currency.

What is the unit for exchange rate?

This is the exchange rate (expressed as dollars per euro) times the relative price of the two currencies in terms of their ability to purchase units of the market basket (euros per goods unit divided by dollars per goods unit).

Is where the cost of one unit of local currency is given in units of foreign currency?

Direct quotation
Direct quotation is where the cost of one unit of foreign currency is given in units of local currency, whereas indirect quotation is where the cost of one unit of local currency is given in units of foreign currency.

How do you explain currency exchange rates?

A foreign exchange rate is the relative value between two currencies. Simply put, “exchange rates are the amount of one currency you can exchange for another.” In travel, the exchange rate is defined by how much money, or the amount of a foreign currency, that you can buy with one US dollar.

Is a foreign exchange rate quoted as the domestic currency?

The exchange rate can be quoted directly or indirectly. The quote is direct when the price of one unit of foreign currency is expressed in terms of the domestic currency. Since the US dollar (USD) is the most dominant currency, usually, the exchange rates are expressed against the US dollar.

How are foreign exchange rates quoted?

Typically, an exchange rate is quoted using an acronym for the national currency it represents. For example, the acronym USD represents the U.S. dollar, while EUR represents the euro. In the case of the Japanese yen, it’s USD/JPY, or dollar to yen. An exchange rate of 100 would mean that 1 dollar equals 100 yen.

What determines the exchange rate of a currency?

A fixed or pegged rate is determined by the government through its central bank. The rate is set against another major world currency (such as the U.S. dollar, euro, or yen). To maintain its exchange rate, the government will buy and sell its own currency against the currency to which it is pegged.

How is the exchange rate expressed?