Exchange Rates (Forex - Direct & Indirect Quotes) | CA Final SFM (New Syllabus) Classes & Videos

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What is an 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?

US$ 1 = INR 65

• 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?

INR 1 = $1/65

• In the above quoted exchange rate:
• The quote is given for 1 unit of INR.
• In this given quote, INR behaves like a commodity.
• For an entity in India, INR is a local currency.
• The given quote is for 1 unit of local currency.
• 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.

#ExchangeRate , #DirectQuote , #IndirectQuote