BCY in banking stands for Base Currency.
The base currency is the first currency listed in a currency pair and indicates the amount of that currency required to purchase one unit of the second currency (the quote currency). It essentially acts as the reference currency for the exchange rate.
For instance, in the currency pair EUR/USD, the EUR (Euro) is the base currency, and the USD (United States Dollar) is the quote currency. If the EUR/USD exchange rate is 1.10, it means that it costs $1.10 USD to buy €1 EUR.
Here's a breakdown:
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Currency Pair: A quotation that shows the relative value of two currencies.
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Base Currency (BCY): The currency that is being valued. It is always expressed as one unit.
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Quote Currency: The currency used to price the base currency.
Key Characteristics of Base Currency:
- It represents the underlying value in a currency pair.
- The exchange rate tells you how much of the quote currency you need to buy one unit of the base currency.
Example:
In the currency pair GBP/JPY, the British Pound (GBP) is the base currency. If the exchange rate is 150.00, it means that £1 GBP costs ¥150 Japanese Yen.
Understanding base currency is fundamental for anyone involved in foreign exchange (forex) trading or international finance.
