The base currency is the first currency listed in a foreign exchange currency pair — the currency whose value is being expressed in terms of the second currency (called the quote currency or counter currency). For example, in the EUR/USD pair, the Euro is the base currency and the US Dollar is the quote currency — a rate of 1.08 means one Euro buys 1.08 US Dollars. In the USD/INR pair — the most actively traded currency pair in Indian forex and currency derivatives markets — the US Dollar is the base currency and the Indian Rupee is the quote currency. A USD/INR rate of 83.50 means one US Dollar buys 83.50 Indian Rupees. Indian exporters who receive USD revenues naturally have a long USD position (they own dollars) and often hedge by selling USD/INR forwards to lock in the rupee equivalent. For importers who owe USD payments, the opposite applies — they buy USD/INR forwards to hedge against rupee depreciation. Understanding the base and quote currency distinction is fundamental to correctly interpreting forex rates and hedging positions.
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