Glossary
Navigate the complex world of currency management with our comprehensive dictionary of financial terms and definitions.
Base Currency Interest Rates
The base currency interest rate is the short-term or money-market interest rate of the currency that, in a currency pair, is quoted first. For example, if the EUR-USD is quoted at 1.25, EUR is the base currency, and the money-market interest rate on EUR is the base currency interest rate. Alongside the money-market interest rate on the quoted currency, the base currency interest rate is used to calculate the forward exchange rate. When calculating the forward rate with the Interest Parity Theorem, the base currency interest rate features in the denominator of that well-known formula.