exchange rates when buying crosses? | Forex Factory

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exchange rates when buying crosses?

  • #1
  • First Post: Dec 30, 2007 1:33pm Dec 30, 2007 1:33pm
Hi this might be a dumb question but I have wondered how they calculate exchange rates for crosses such as EUR/GBP. Since my account is in USD, how can I buy E/G for a certain price (ex: 0.7374) without converting dollars to euros first? And if I do have to convert dollars to euros for this transaction, am I getting the bad end of the spread again? Maybe there's something simple I'm missing...
  • #2
  • Dec 30, 2007 1:45pm Dec 30, 2007 1:45pm
Any cross rate is the product of the two underlying majors, however, one of the rates must be represented in dollar terms, i.e. USD/xxx.

EUR/USD = 1.4724
USD/GBP = .5009

EUR/GBP = 1.4724 * .5009 = .7375


The conversion to euros is handled automatically when you buy EUR/GBP. There's no conversion to euros first on your end. You're only paying the spread for EUR/GBP.
  • #3
  • Dec 30, 2007 2:12pm Dec 30, 2007 2:12pm
Thanks, that makes sense!
  • #4
  • Jan 8, 2008 10:39pm Jan 8, 2008 10:39pm
Quoting Betard
Thanks, that makes sense!
Not exactly on point but I don't want to start yet another thred....

I notice some brokers pay swap points by adjusting your opeing price on a long ttrade every two days tom/next basdisc...my newbis question is that
the adjustment i see made in me deom account shows the base price I paid
for the long spot posiition (in this case the NZD/JPY) increasing by a couple pips from say 86.63 to 86.665 at 5:00 EST today etc..

.does this adjustment mean that my account balance has been credited with positive interest? or not? I am a little confused since i would prrefer just a straiaght debit or credit to my account.

thanks
  • #5
  • Jan 8, 2008 11:36pm Jan 8, 2008 11:36pm
Quoting candaguy2007
Not exactly on point but I don't want to start yet another thred....

I notice some brokers pay swap points by adjusting your opeing price on a long ttrade every two days tom/next basdisc...my newbis question is that
the adjustment i see made in me deom account shows the base price I paid
for the long spot posiition (in this case the NZD/JPY) increasing by a couple pips from say 86.63 to 86.665 at 5:00 EST today etc..

.does this adjustment mean that my account balance has been credited with positive interest? or not? I am a little confused since i would prrefer just a straiaght debit or credit to my account.

thanks
Raising your basis is the equivalent of charging you interest. If you were in a long position, your basis should have been lowered, not raised. I would call your broker and find out what happened before you open a live account with them.
  • #6
  • Last Post: Jan 8, 2008 11:43pm Jan 8, 2008 11:43pm
Quoting Trader KGB
Raising your basis is the equivalent of charging you interest. If you were in a long position, your basis should have been lowered, not raised. I would call your broker and find out what happened before you open a live account with them.
Thank you, that's what I thought...I can't a stragith asnwer from the broker
(saxobank) and though it's only in a demo account, it's bothering me that
a long pair such as NZD/JPY is not paying postive interest but chargin intereset...I tried to read the
saxoank swap rate explanation but it still doesn't click...I do have offsetting option positions against the sport position but according to saxobank those postions neither attract or are charged interest...live help is of no assistance either.
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