Cross Rate

What is Cross Rate?

The exchange rate of major international currencies are quoted with reference to their base currencies e.g. in London with reference to Pound sterling and in New York with reference to US Dollars. At times for transactions between two currencies whose rates are not quoted, a third currency rate may have to be used and then using the third currency calculate the rate between the two specific currencies. Such a rate is known as cross rate e.g. a customer wishes to buy French Franc against Pakistan rupees. We may have to buy US Dollars first and then buy Fr. F. against US Dollars. Thus the rate will be calculated as under:

US$  Pakistan.  Rs.

US$    Fr.  F

Then Fr. F  : Pakistan Rs.

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