Definitions
An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the USD.
Cross rate is a correlation between two currencies based on correlation between their exchange rate and third currency exchange rate.
World market operation s usually use cross rates there American dollar plays a role of such third currency, since it’s not only reserve currency but also a key currency of monetary operations.
All calculations on cross rates connected with direct quotation currencies are determined by multiplying, all calculations on cross rates connected with indirect quotation currencies are determined by division.
If XXX/YYY is a cross rate abbreviation and XXX corresponds to direct quotation currency, then:
If YYY corresponds to indirect quotation currency, then:
If YYY element corresponds to direct quotation currency, then multiplying is needed:
If YYY element corresponds to indirect quotation currency, then division is needed:
For example, EUR/CHF = USD/CHF * EUR/USD.
GBP/EUR = GBP/USD : EUR/USD