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Currency Pairs and Quoting Conventions

FX quoting has conventions that are arbitrary but universal, and getting them wrong inverts your position. Interview questions in this area test care, not insight.

Base and quote

A pair is written BASE/QUOTE. The number is how many units of the quote currency buy one unit of the base.

EUR/USD=1.1000  ⟹  1 euro costs 1.10 dollars\text{EUR/USD} = 1.1000 \implies \text{1 euro costs 1.10 dollars}

Buying EUR/USD means buying euros and selling dollars. If the rate rises to 1.12 you profit, because your euros now buy more dollars.

The convention is fixed by market practice, not logic. EUR is always the base against USD; USD is the base against JPY. So EUR/USD rising means a weaker dollar, while USD/JPY rising means a stronger dollar. Reading a move as dollar-positive or dollar-negative therefore requires knowing which side the dollar is on.

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