Cross Rate
a.k.a. Crosses, Cross currency pair
An exchange rate between two currencies where neither is the US dollar, such as EUR/GBP or AUD/JPY.
Most currency trading runs through the US dollar. A cross rate skips it: EUR/JPY, GBP/CHF, AUD/NZD. Historically these were calculated by going through the dollar, and the maths still works that way: EUR/JPY ≈ EUR/USD × USD/JPY.
Crosses often have wider spreads than the majors. They let you bet on two currencies against each other without the dollar muddying the story.
Building a cross
- EUR/USD = 1.0800.
- USD/JPY = 150.00.
- EUR/JPY ≈ 1.0800 × 150.00 = 162.00.
Bottom line: If the real EUR/JPY quote drifts far from 162, arbitrage traders snap it back.
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