Currencies are traded against each other in Forex.Each curreccy thus constituents an individual trading product and is traditionally noted XXXYYY or XXX/YYY,where XXX and YYY are the ISO 4217 international three letter code of the currencies involved.The first currency(XXX) is the base currency that is quoted relative to the second currency(YYY),called the counter currency or the quote.For instance the quotation EURUSD(EUR/USD) 1.5465 is the price of euro expressed in US dollars,meaning 1 euro=1.5465 dollars.The market cinvention is to quote most exchange rates aganist the USD.With the US dollar as the base currency(eg.USDJPY,YSDCAD,USDCHF).The exceptions are the British pound(GBP),Australian dollar(AUD), the New Zealand dollar(NZD) and the euro(EUR) where the USD is the counter currency.(eg.GBPUSD,AUDUSD,NZDUSD,EURUSD).
The factors affecting XXX will affect both XXXYYY and XXXZZZ.This causes positive correlation between XXXYYY and XXXZZZ.
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