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This reduces rounding issues and the need to use excessive numbers of decimal places.

There are some exceptions to this rule: for example, the Japanese often quote their currency as the base to other currencies.

This is the exchange rate (expressed as dollars per euro) times the relative price of the two currencies in terms of their ability to purchase units of the market basket (euros per goods unit divided by dollars per goods unit).

If all goods were freely tradable, and foreign and domestic residents purchased identical baskets of goods, purchasing power parity (PPP) would hold for the exchange rate and GDP deflators (price levels) of the two countries, and the real exchange rate would always equal 1.

Forex markets are among the most active markets in the world in terms of dollar volume.


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