Understand dollar straight and cross yen [Hisashi Endo]

Currency pairs tradable in FX are broadly classified into two types: “Dollar-Rate Pairs” and “Cross Yen.” Both terms are commonly seen, but many traders engage in trading without fully understanding their meanings. To broaden your currency pair selection and trading scope, let’s thoroughly understand their mechanisms and characteristics here.

Toshio Endo Profile

In 1998, he joined the first FX business team in Himawari Securities in Japan. In 2007, after serving as a director of FXZERO Co., Ltd., he is currently part of the YJFX! Marketing Department. Since 1998, leveraging experience in creating investor-oriented content and planning FX, he works as an FX evangelist, providing information, writing FX columns, and conducting seminars.

Currency Pairs Are Composed of a Base Currency and a Counter Currency

The currency pair traded in FX is displayed with two currencies separated by “/,” such as “USD/JPY” or “EUR/USD.” The left side is called the “base currency,” which means the currency being paid. The right side is called the “counter currency,” which means the currency being purchased. Also, the unit naming refers to the counter currency on the right, so for example, “USD/JPY” is read as “113 yen per dollar,” and “EUR/USD” is read as “1.1800 dollars per euro.”

P&L (profit and loss) and swap points generated from FX trading are settled in the counter currency on the right. Profits and losses from trading “USD/JPY” are realized in yen, while profits and losses from trading “EUR/USD” are realized in dollars. However, in many Japanese FX companies today, profits, losses, and swap points incurred in currencies other than yen are automatically translated back to yen, so many people do not notice this.