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Definition: Indirect Quote
It is a way of quoting an exchange rate through which the amount of foreign currency equivalent to one unit of domestic currency is expressed. Here, the domestic currency is treated as the base currency and the foreign currency is treated as the counter currency.
Let us take the case of USD and INR. Within India, INR would be the domestic currency and USD would be the foreign currency. The usual way of expressing the exchange rate is the “direct quote” which would be written as follows:
1 USD = 60 INR (say)
On the other hand, in an indirect quote, INR is treated as the base currency based on which the exchange rate would be written as follows:
1 INR = 0.0167 USD (i.e. 1/60 USD)
An indirect quote is also termed as “quantity quotation” and a direct quote is synonymously called “price quotation”.
An increase in exchange rate as expressed by a direct quote indicates that the domestic currency is weakening as against the foreign currency (1 USD can buy 62 INR v/s 60 INR). On the contrary, a higher exchange rate in an indirect quote shows appreciation of the local currency (1 INR can buy 0.05 USD v/s 0.0167 USD).