What is Currency Pair?

Currency pair: Quotation of two different currencies, where the value of one currency is being quoted against the other.

Price Quote of a Currency Pair: Currency pairs compare the value of one currency to another—the base currency (or the first one) versus the second or the quote currency. This comparison indicates how much of the quote currency is needed to purchase one unit of the base currency.

FX trade: All forex trades involve the simultaneous purchase of one currency and the sale of another.

The base currency serves as the "benchmark" for buying and selling foreign currencies. If you are optimistic that the U.S. dollar appreciating relative to the Japanese yen, you would buy the U.S. dollar (base currency) and sell the Japanese yen. If you believe that the U.S. dollar will depreciate, selling the U.S. dollar against the Japanese yen is equivalent to selling the U.S. dollar and buying the Japanese yen.

Example:

The quotation EUR/HKD = 8.5 means that one euro is exchanged for 8.5 Hong Kong dollars.

Considering the current exchange rate between the euro and the Hong Kong dollars is at 8.8 now, meaning every 1 euro can be exchanged for 8.8 Hong Kong dollars, the Hong Kong dollar’s convertibility for every 1 euro has increased from 8.5 Hong Kong dollars to 8.8 Hong Kong dollars. This change is equivalent to the euro appreciating against the Hong Kong dollar by about 3.5%. Conversely, from the perspective of the Hong Kong dollar, it has depreciated against the euro.

The above information provided by J.P. Morgan Securities (Asia Pacific) Limited ("J.P. Morgan") is for information and discussion purposes only and is not intended as an offer, invitation, inducement, advice, recommendation or solicitation for the purchase or sale of any above-mentioned listed structured products or financial instruments nor does it constitute a commitment by J.P. Morgan or its affiliates ("J.P. Morgan Group") to enter into any transaction. Past performance is not indicative of future results. There can be no assurance that future results or events will be consistent with any opinions, forecasts or estimates herein.
FX warrants (or currency warrants) are non-collateralised structured products. The price of the structured products may fall in value as rapidly as it may rise and investors may sustain a total loss of their principal invested. J.P. Morgan does not act as a fiduciary for or an advisor to any investor and is not responsible for determining the legality and suitability of an investment in any products or financial instruments by any prospective purchaser or existing holders. Investors must make their own risk assessment and where necessary, seek professional advises. Investor should not invest in these structured products unless they carefully read and understand the terms and conditions, risk factors and other information as set out in the relevant listing documents, and fully understand the features of the structured products and are willing to assume the risks associated with them.