InvestorQ : How to do trading in foreign exchange in India and does the dollar have to be the base pair always?
Niraja Mehta made post

How to do trading in foreign exchange in India and does the dollar have to be the base pair always?

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Mahil Khan answered.
2 years ago
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In India, the NSE and the BSE offer currency futures and also currency options. Not surprisingly, the USD/INR pair is the most liquid contract but other contracts are also catching up. Structurally, the currency futures and currency options operate on the same lines as the equity and commodity derivative markets. It is just that unlike equities and commodities, the currency futures trade in pairs. For example, if you expect the US dollar to strengthen then you buy a USD-INR pair and if you expect the rupee to strengthen then you sell the USD-INR pair. But does the dollar always have to be the base currency?

That is not necessary at all! Any currency can be the base currency. For example, in Euro / Dollar trades, it is normally the Euro that is the base currency and the US dollar is the quotation currency. Similarly, when we write INR 1 / Yen = 1.95, then the INR becomes the base currency and the Japanese Yen becomes the quotation currency with a value of Yen 1.95. Normally, the currency with the higher valuation becomes the base currency as it becomes easier to trade in round numbers rather than in decimals.

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