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Answer: EUR/CNY is 7.1275/7.1293 (base/quote is bid/ask)
To construct the **EUR/CNY cross rate**, multiply the EUR/USD rate by the USD/CNY rate because: - **EUR/USD** = USD per 1 EUR - **USD/CNY** = CNY per 1 USD - Therefore, **EUR/CNY** = CNY per 1 EUR For the **bid** on EUR/CNY, use the bid prices of both legs: - EUR/USD bid = **1.1140** - USD/CNY bid = **6.3981** \[ \text{EUR/CNY bid} = 1.1140 \times 6.3981 \approx 7.1275 \] For the **ask** on EUR/CNY, use the ask prices of both legs: - EUR/USD ask = **1.1142** - USD/CNY ask = **6.3986** \[ \text{EUR/CNY ask} = 1.1142 \times 6.3986 \approx 7.1293 \] So the market-implied bid-ask is **7.1275 / 7.1293**.
Author: Manit Arora
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Q-500.1. Below are spot exchange rates (on August 13th, 2015) for two currency pairs: EUR/USD and USD/CNY; CNY is the currency code for the Chinese yuan, the basic unit of the renminbi.
| EUR/USD (EURUSD=X) - CCY | USD/CNY (USDCNY=X) - CCY |
|---|---|
| 1.1141 ↓ 0.0014 (0.12%) | 6.3968 ↑ 0.0078 (0.1200) |
| Prev Close: | 1.1155 | Prev Close: | 6.3891 |
|---|---|---|---|
| Open: | 1.1160 | Open: | 6.3884 |
| Bid: | 1.1140 | Bid: | 6.3981 |
| Ask: | 1.1142 | Ask: | 6.3986 |
Source is Yahoo! Finance (http://finance.yahoo.com). Please note that both of the above are given in the base/quote format, which is typical; e.g., "The first currency that is quoted in a currency pair is known as the base currency and the second is known as the counter currency," The Little Book of Currency Trading: How to Make Big Profits in the World of Forex, p. 36. Wiley. Kindle Edition. Therefore, in EUR/USD, the base currency is EUR, and the quote (aka, price, counter) currency is USD, while in USD/CNY, the base currency is USD, and the quote currency is CNY.
What is the market-implied bid-ask on the EUR/CNY cross rate?
A
EUR/CNY is 0.1741/0.1741 (base/quote is bid/ask)
B
EUR/CNY is 5.7428/5.7434 (base/quote is bid/ask)
C
EUR/CNY is 7.1275/7.1293 (base/quote is bid/ask)
D
EUR/CNY is 8.6261/8.6270 (base/quote is bid/ask)
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