Cross Rate

A cross rate lets you work out the value of one currency relative to another when you already know each of them relative to a shared third currency. The idea is that the shared currency acts like a bridge: multiplying by one rate and dividing by the other cancels out the common unit, leaving the direct A-to-C exchange rate. This is especially useful in forex markets because not every currency pair is quoted directly all the time.

Use this when you need the exchange rate between two currencies that are not directly quoted, but both are quoted against a common base currency such as USD. It is also useful for checking whether a quoted cross rate is consistent with the underlying market rates.

• Using the wrong direction for the division and reversing the quote
• Mixing up which currency is the base and which is the quote
• Forgetting to keep the units consistent when converting through the common currency