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Definition: Pip

Pip refers to the smallest change in price that an exchange rate can make. Since most of the exchange rate pairs are denoted to four decimal places. The smallest change that can be witnessed is that of the last decimal point which in most cases is 1/100 th of a percent that is 1 basis point.

Example, the pip or the smallest change in price that the currency pair USD/INR can make is $0.0001, or one basis point.

The smallest move in a currency need not be equal to one basis point, yet this is generally the most observed case with most currencies.


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