Indirect Quote

What is an indirect quote?

An indirect quote (also called a quantity quotation) in foreign exchange shows how much foreign currency is required to buy one unit of the domestic currency. It treats the domestic currency as the base and the foreign currency as the counter. The opposite is a direct quote (or price quotation), which prices one unit of a foreign currency in terms of units of the domestic currency.

How indirect quotes work in forex

• Indirect quote format: 1 (domestic) = X (foreign).
• A lower value of an indirect quote indicates the domestic currency is weakening (you need fewer units of foreign currency to buy one unit of domestic currency).
• Market conventions depend on currency dominance. Because the U.S. dollar (USD) is the global reference currency, many pairs are quoted with USD as base (direct from a U.S. perspective). Some currencies, such as the euro (EUR) and Commonwealth currencies (GBP, AUD, NZD), are commonly quoted in the form: GBP 1 = USD 1.30 (an indirect-style presentation relative to the U.S. view).

Example:
– If the market shows USD/CAD = 1.2500, that means 1 USD = 1.2500 CAD.
– From a Canadian perspective (domestic = CAD), the indirect quote is C$1 = US$0.8000 (reciprocal: 1 / 1.2500 = 0.8000).
– From the U.S. perspective, USD/CAD = 1.2500 is an indirect quote because it shows how much foreign currency (CAD) is required to obtain 1 USD.

If USD/CAD moves from 1.2500 to 1.2300:
– 1 USD now = 1.2300 CAD → USD weakened (less CAD needed for 1 USD).
– Reciprocal direct view: 1 CAD = 1 / 1.2300 = 0.8130 USD (up from 0.8000 USD).

Cross-currency rates

To price a currency pair that does not involve USD, use other quoted pairs and reciprocal arithmetic. Example using USD/JPY and USD/CAD:

Given:
– USD/JPY = 100 (1 USD = 100 JPY)
– USD/CAD = 1.2700 (1 USD = 1.27 CAD)

Compute CAD/JPY (conventional quote):
– CAD/JPY = USD/JPY ÷ USD/CAD
– 1 CAD = 100 ÷ 1.2700 = 78.74 JPY

Viewed from the JPY domestic side:
– 1 JPY = USD/CAD ÷ USD/JPY = 1.2700 ÷ 100 = 0.0127 CAD

Key differences: indirect vs direct quotes

• Indirect quote (quantity quotation): 1 unit of domestic currency expressed in units of foreign currency (1 domestic = X foreign).
• Direct quote (price quotation): 1 unit of foreign currency expressed in units of domestic currency (1 foreign = Y domestic).
• They are reciprocals of each other: multiply an indirect quote by its direct quote = 1.

Practical implications

• Always confirm which currency is the base (domestic) when reading quotes; interpretation of appreciation/depreciation depends on quote type.
• For cross-rates, identify whether existing quotes are direct or indirect for each currency pair, then apply division or multiplication accordingly.

Takeaways

• An indirect quote shows how much foreign currency is needed to buy one unit of domestic currency (a “quantity quotation”).
• It is the reciprocal of a direct quote.
• A falling indirect quote signals domestic currency depreciation.
• Properly identifying quote types is essential for accurate cross-rate calculations and forex trading decisions.