Base currency
1.
The 'base currency' in a foreign exchange rate quotation is the currency which there is one of.
Example 1: foreign exchange rate quotation
In the quotation 1 GBP = 1.4600 USD,
the base currency is GBP;
meaning one British pound would be exchanged for a variable number of USD, depending on the rate quoted.
The base currency is also known as the Reference currency or the Fixed currency.
2.
More generally, a 'base currency' means the currency with which other currencies are compared.
Example 2: multicurrency liquidity arrangement
In a multicurrency liquidity arrangement, 'base currency' refers to the currency in which the master account is denominated and to which all other currencies are converted.
The base currency also serves as the basis for all interest rate calculations in the multicurrency liquidity arrangement.
Example 3: foreign exchange gains and losses
In calculating a foreign exchange gain or loss, a 'base' currency means the currency which is not considered to be 'foreign' currency for the purpose of calculating foreign exchange (FX) movements.
In this context, FX movements arise when an organisation enters into a transaction in a foreign currency. Gains and losses are recognised, either on an accruals basis or a realisation basis, between the value of the transaction in the ‘home’ (or base) currency at two different points in time.
