Vince Bellino ’14, Staff Writer
A currency is term used to depict the forms of money such as coins and paper notes that we use in exchange for a good or service. Typically, each country has its own designated currency. For example, the Japanese Yen (JPY), Euro (EUR), or the American dollar (USD). As of November 4, 2013, Japanese yen was trading at 98.31 USD/JPY. What does that mean? Let’s begin by identifying how to read this currency pair. In this case, the USD is called the “base currency” and will always be equal to one unit. The JPY is called the “quoted currency” and will always be equivalent to the one base unit. So, in this case, $1 is equal to ¥98.31 or one US dollar can buy 98.1 Japanese yen.
Another well know currency pair is the EUR/USD. As of November 4, 2013, the Euro was trading at 1.3504. Again, if one was to read the value of the US dollar relative to the Euro, the base currency is EUR and the quoted is the USD. Therefore, €1 is equal to $1.3504, or one Euro can buy 1.3504 dollars.
So how we know how strong any given currency is relative to another? In the example of the Yen, the higher the quoted currency, the stronger the dollar becomes. If the yen trades at ¥98.31 one day and the next at ¥99, the US dollar strengthened. Why? Well because one dollar buys more yen as the price appreciates which leave a weaker yen. On the other hand, the more the dollar appreciates relative to the Euro, the weaker it becomes. This is because €1 can buy more dollars, thus leaving the US a weaker dollar. There is an inverse relationship between reading the strength of the dollar relative to the yen and euro currencies. So, for students traveling abroad or for vacation, it is important to be cognizant of the strength of the dollar relative to foreign currencies.