Forex Quote

A Forex quote is always a two-sided quote with a ‘bid’ and ‘offer’. The ‘bid’ is the price at which you can sell the base currency (i.e. buy the second currency). The ‘offer’ is the price at which you can buy the base currency (i.e. sell the second currency).
As mentioned before, the first currency listed is the base currency. In the major currency pairs the US dollar is traditionally treated as the base currency this includes USD/JPY, USD/CHF and USD/CAD. In this case $1 USD (the base currency) is quoted in terms of the second currency. For example, a quote of USD/JPY = 112.25 means that one US dollar is equal to 112.25 Japanese Yen.

Among the major currency pairs there are three exceptions where the US dollar is not quoted as the base currency, the Euro (EUR), the British Pound (GBP), and the Australian Dollar (AUD). In these cases, you might see a quote such as GBP/USD = 1.8455, which means that one British Pound equals 1.8455 US dollars.
In both of the above examples the base currency becomes stronger when its price increases. For example if the USD/JPY rises from 112.20 to 113.20 the dollar is stronger because it is now worth more JPY.
Cross currencies are currency pairs that do not involve the US dollar. For example: EUR/GBP, GBP/AUD, EUR/JPY, etc. A quote of EUR/GBP at 0.6750 signifies that one Euro is equal to 0.6750 British Pounds.

All Forex quotes are typically based on settlement business days after the transaction was executed (the one major exception being the USD/Canadian Dollar which settles after one business day). Theoretically a currency trader will take physical delivery of the currency in two days; however, delivery is avoided by rolling the positions forward one day, usually referred to as Tomorrow Next Day (Tom Next) procedures. The newly opened position is assigned a new value date allowing the client to hold this position another day without taking delivery of the currency.

The Tom Next rate is determined by the respective difference in interest rates between the two currencies held. If a trader is long a high interest currency and short a low interest currency he will earn interest for one day. If a trader is holding the foreign currency with the lower rate of interest he will pay interest. These payments are received during the establishment of the new opening rate, in the form of a slightly better or worse price after the roll (swap) has taken place.

During the roll procedure all open positions are closed at the current market rate, and any unrealized profits or losses are realized. This new rate is determined by the price the position was closed out at plus or minus the Tom Next rate. If a trader is flat e.g. long €2 million EUR/USD and short €2 million EUR/USD it is not necessary to roll positions.