Cross Rate Trading Cross rates

Rates in which the dollar is neither the base nor the terms currency, such as “mark-yen,” in which the DEM is the base currency; and “sterling-mark,” in which the pound sterling is the base currency.


In cross trades, either currency can be made the base, although there are standard pairs mark-yen, sterling-swissie, etc.As usual, the base currency is mentioned first.


There are both derived cross rates and directly traded cross rates. Historically, cross rates were derived from the dollar rates of the two named currencies, even if the transaction was not actually channeled through the dollar.

Thus, a cross rate for sterling-yen would be derived from the sterling dollar and dollar-yen rates. That continues to be the practice for many currency pairs, as described in Box 5.1, but for other pairs, viable markets have developed and direct trading sets the cross rates, within the boundary rates established by the derived cross rate calculations.