Indirect Quote

An indirect quote expresses an exchange rate as the number of foreign currency units required to purchase one unit of the domestic (or reference) currency. If you are quoted 1.25 CHF/USD, that’s an indirect quote from the USD perspective—you need 1.25 Swiss francs to buy one dollar. This inverts the more familiar direct quote, where the price is quoted as domestic per foreign unit.

When and why indirect quotes are used

Indirect quoting matters because markets adopt different conventions by geography and history. The interbank-fx-market typically quotes EUR/USD (euros per dollar), which is a direct quote for a US trader but an indirect quote for a eurozone trader. The same rate can be expressed both ways; the indirect quote is simply the perspective shift.

Banks and dealers choose conventions based on what makes the most intuitive sense to their main customer base. A Swiss exporter pricing in USD may naturally think in terms of how many francs each dollar costs—that’s the indirect quote. The convention persists because traders build mental anchors around those rates and because switching conventions mid-session invites counterparty-risk through confusion.

The arithmetic relationship

If a direct quote is 0.80 USD/EUR (meaning one euro costs 0.80 dollars), the indirect quote from the US perspective is 1.25 EUR/USD (one dollar costs 1.25 euros). They are reciprocals: 1 ÷ 0.80 = 1.25. No information is lost in the conversion; it’s purely notational.

This reciprocal relationship matters for spread calculations. An indirect quote with a wide spread (say 1.240–1.260 EUR/USD) looks wider in absolute terms than a direct quote of 0.794–0.806 USD/EUR, but the proportional cost to trade is identical. Traders therefore compare spreads in basis points (or pips) to adjust for the scale difference.

Historical and regional conventions

The pound sterling, historically the world’s dominant reserve currency, established a tradition of quoting most currency pairs indirectly—GBP/USD was quoted as dollars per pound, not pounds per dollar. That convention has largely reversed as the US dollar became the primary reserve, and modern platforms quote USD/GBP (US dollars per pound sterling) as direct.

Emerging market currencies often inherit quoting conventions from their colonial or trade history. Some maintain indirect quotes out of inertia; others have shifted as their economies globalised and adopted the USD-centric convention. The London-stock-exchange and other major markets publish both conventions, letting traders choose.

Indirect quotes in trading practice

A retail forex broker quoting EUR/USD at 1.0850 is expressing direct quotes (euros per dollar from a USD trader’s lens). If the same broker quotes USD/CHF at 0.92, that’s also direct. But if a Swiss bank quotes CHF/USD at 1.08, it’s expressing indirectly: how many francs per dollar. Both banks are quoting the same rate; only the perspective differs.

Confusion arises when traders assume a single “correct” direction. In global over-the-counter-market dealing, always clarify: “Is that indirect to you?” prevents counterparty-risk disasters. Algorithms and execution platforms often accept both formats and auto-convert; manual traders must stay vigilant.

Spot rates and forward rates

An indirect quote applies equally to spot-exchange-rate trades (immediate settlement, typically T+2) and forward-contract rates (future delivery). The quoting convention doesn’t change the settlement; it only changes how the rate is stated. A trader executing a three-month forward contract at an indirect quote pays the stated rate regardless of where they convert the number.

Indirect quotes are also common in currency-volatility reporting. If volatility is quoted as a percentage of the indirect rate, traders must remember to scale their exposure calculations. A 5% move in an indirect quote (1.20 → 1.26 CHF/USD) is the same notional move as a 5% inverse move in the direct quote.

Why you’ll still see them

Despite the shift towards USD-centric direct quoting, indirect quotes persist in corporate treasuries, emerging market desks, and certain hedge-fund strategies. They’re embedded in legacy systems and in traders’ intuitions. A Japanese corporation importing from Switzerland still naturally thinks “how many yen do I spend per franc?” rather than “how many francs per yen?”

Understanding indirect quotes protects you from price-discovery errors and from misreading a dealer’s bid-offer spread. When you see an odd-looking rate, the first question is: “Am I reading this direct or indirect?"—and the answer determines whether you’re looking at a bargain or a trap.

See also