What are cross courses?
Cross rates (Cross rates, Crosses, Secondary pairs, Minors) are currency pairs that do not include the US dollar. Sometimes you may also encounter terms such as exotic rates, secondary pairs, or crosses. However, regardless of the name, they always mean the same thing.
Why were cross courses created?
This is in response to the study of the relationship between currencies. It used to be that in order to convert euros to yen, one had to first convert euros to dollars and then dollars to yen, since all currencies were priced against the dollar. With cross rates, it is now possible to calculate the relationship in the euro/yen pair and exchange the currencies immediately. Even so, the dollar still has its share.
How to calculate cross rates?
Calculating cross rates is made easier because you can use online calculators for this, but it is still useful to know how the process works. Taking the EUR/PLN pair as an example, first calculate the ratio of the euro to the U.S. dollar, then the zloty against the U.S. dollar. The result of these juxtapositions is a crossover, which is just called the cross rate.
Where can I find cross rate tables?
Cross rate tables are useful for calculating relationships in secondary pairs. They are published by various financial institutions, so you can calculate the price relationships of currencies based on certain information.
Why are cross courses used?
The reasons for using the rates are many. First of all, thanks to these rates, speculation on the U.S. dollar has been somewhat reduced, since investors no longer need to use it as an intermediary when they want to invest in other foreign currencies. Another reason is that some pairs have a better direct relationship to each other than if they were compared via the US dollar.
Is it worth investing in secondary pairs?
It is not always known whether the dollar will be stable enough at a particular moment to even participate as an intermediary in investing in currencies, so secondary pairs allow you to bypass the dollar and therefore save on potential sudden changes in the rate.
