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What are forward

discount and
premium?
Some basic
• In terms of foreign exchange trading, currencies are quoted in terms of a currency
pair.

• The first currency in the pair is the base currency. The base currency is the
currency against which exchange rates are generally quoted in a given country.

• Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is
the base currency
Please note that
USD/JPY, the US Dollar is the base currency

EUR/USD, the EURO is the base currency

JPY
USD/JPY = , say 110, that’s means 1$ = 110 JPY.
USD

Or

USD
EUR/USD = , say 1.15, that’s means 1EUR = 1.15 USD.
EUR
Please note that
USD/JPY, If you are buying USD/JPY: that’s means you are buying USD and
selling JPY and vice verse

EUR/USD, If you are buying EUR/USD: that’s means you are buying EUR and
selling JPY and vice verse

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