Dealing with dealers

The dollar dominates. Currencies are frequently quoted in terms of one US dollar. Sterling is an exception: a hangover from the days of pounds, shillings and pence, when it was easier to quote the decimal-dollar per one British pound. The euro has also managed to carve itself a niche as a base currency.

Spreads, bids and offers. For general use, exchange rates are usually specified to about five significant figures with two or four decimal places. See Fig. 20.1. Dealers quote rates as two numbers, such as $1.0554–1.0555 to the euro. This indicates that dealers are bidding to buy dollars (in exchange for euros) at $1.0555 and offering (or asking) to sell dollars for $1.0554. The spread between the bid and offer/ask indicates ...

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