Cross exchange rate
A cross rate can be calculated from two consistent exchange quotations involving a common currency. Write the units explicitly and multiply or divide so the common currency cancels. With bid and offer quotes, use the appropriate side of each transaction and allow for spreads; a simple midpoint calculation does not establish an executable dealing rate. Cross rates help compare or construct currency conversions, but actual quoted prices, transaction costs and settlement conventions can differ.
Worked example
If €1 buys $1.20 and £1 buys $1.50, then £1 buys $1.50 ÷ $1.20 per euro = €1.25 on those single illustrative rates. A bank's executable bid and offer rates can give different results.
Common mistake
Multiplying two quotes without checking units, or treating a midpoint cross rate as a guaranteed dealing rate.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Supporting | September 2026–June 2027 |
