Foreign exchange or forex trading is one of the most popular trading alternatives across the world. According to Investopedia, the global forex markets generate a huge volume of wealth every day that can surpass $ 6.6 trillion.
Forex trading can be a great way to amass personal wealth within a short time and doesn’t require you to invest thousands of pounds into expensive college degrees. The flexibility associated with the profession also makes it easy for you to become a forex trader part-time.
More than often, short-term trading courses or boot camps are sufficient to help you understand the complexities of forex trading. A comprehensive forex trading course in the UK can be sufficient to familiarise you with important forex concepts such as lots or reciprocal currency.
If you haven’t come across the term reciprocal currency or are new to trading, this blog can be a helpful read. Let’s do a deep dive into the meaning of the term and its significance in forex trading.
What is reciprocal currency?
The term reciprocal currency refers to a forex currency pair out of which one is the US Dollar. However, it is the quote currency in the pair instead of being the base currency. The reciprocal currency is generally quoted in terms of the number of USD available per unit of foreign currency.
For instance, in a EURO/USD pair, a quote of 1.20 would mean that one euro can buy you $1.20.
Major reciprocal currencies include:
- EUR/USD (Number of US dollars available per Euro)
- NYZ/USD (Number of US dollars per New Zealand Dollar)
- USD/JPY (Number of Japanese Yen per US Dollar)
- AUD/USD (Number of US Dollars per Australian Dollar)
- GBP/USD (Number of US Dollars per British Pound Sterling)
What else do you need to know about reciprocal currencies?
Knowing the meaning of just the term reciprocal currency isn’t enough to become a seasoned forex trader. Here are a few terms associated with reciprocal currencies that you ought to know about as a forex trading aspirant.
- Reciprocal currency arrangement: The term refers to an official contract or agreement between the governments of two nations to maintain a specific constant supply of each other’s currencies.
- Currency pair: The term refers to two specific currencies whose values are compared against each other during a forex transaction.
How can you find out the reciprocal exchange rate of a currency pair?
It’s easy to find out the reciprocal exchange rate of any currency pair as long as you know your forex basics. A reciprocal exchange rate is the inverse of the actual exchange rate of a currency pair.
For instance, if the exchange rate for a USD/EUR currency pair is 0.89, you can find the reciprocal exchange rate by dividing one by the exchange rate (1/0.89). In this case, the value would be equal to 1.12.
A comprehensive forex trading program can teach you everything you need to know about reciprocal exchange rates and forex trading in general. Start looking for appropriate courses from established trading schools to get started.
