The term ‘Base Currency’ refers to the primary currency in a financial transaction or trade that establishes the standard against which other currencies are compared. In currency pairs, the base currency is the first currency listed and is used to determine the value of the second currency, known as the quote currency. For example, in the pairing USD/EUR, the U.S. dollar (USD) is the base currency, while the euro (EUR) is the quote currency.
In payment processing, the base currency is crucial for converting currencies when conducting international transactions. Financial institutions and payment platforms will use the base currency to calculate exchange rates and fees, determining how much the recipient will receive in their local currency. Understanding base currency helps businesses and individuals manage currency risk and make informed financial decisions, especially in foreign exchange markets where fluctuations can impact the value of transactions.
