Foreign exchange rates

A foreign exchange rate is the parity between two currencies i.e. the amount of one currency needed to sell (or buy) in order to buy (or sell) one unit of the other currency. There are two ways to express such a rate. The most common (or international way) quotes the amount of any currency that corresponds to one U.S.Dollar. So when we see USD/DEM at 1.5000 this means that one dollar can be exchanged for 1.5 Dmarks. Among the major currencies it is only British sterling which is quoted the other way i.e. GBP/USD at 1.5500 means that one pound is exchanged for 1.55 dollars. The American way of quoting rates uses the opposite direction, that is it expresses the dollar amount that can be exchanged for one unit of foreign currency. So when we see for example the Dmark at 0.6625 this means that one mark can be exchanged for 0.6625 dollars (or the same at 66 1/4 cents). The term "cross rate" is usually used to express the parity between two nondollar currencies like DEM/SFR.