Market StructureCrossCurrency Cross
Cross Rate
An exchange rate between two currencies derived from, or quoted without reference to, the US dollar.
What Cross Rate means
A cross rate is the exchange rate between two currencies where neither is the US dollar, or more strictly a rate calculated from two separate dollar quotes. Historically, banks quoted almost everything against the dollar, so a rate such as EUR/GBP was obtained by dividing EUR/USD by GBP/USD. That arithmetic still underpins pricing on less active crosses, and it is why the effective spread on a cross often approximates the sum of the spreads on the two dollar legs.
Because crosses can be synthesised, arbitrage keeps the quoted cross close to its implied value; persistent gaps are quickly closed by banks and automated systems. For a trader, the practical uses are hedging out unwanted dollar exposure and expressing relative strength views directly. The caveat is cost: unless the cross has genuine direct liquidity, the derived spread makes short-term trading expensive, and execution can deteriorate when either underlying dollar leg becomes illiquid.
Worked example
With EUR/USD at 1.0850 and USD/JPY at 152.40, the implied EUR/JPY cross rate is 1.0850 multiplied by 152.40, or about 165.35.
Related terms
- Minor PairsPairs made up of two major currencies but excluding the US dollar, such as EUR/GBP, EUR/JPY or AUD/NZD.
- Currency PairTwo currencies quoted against each other, expressing how much of the second currency one unit of the first is worth.
- SpreadThe difference between the bid and the ask price, and the most common way a forex broker is paid.
- Interbank MarketThe wholesale tier of the foreign exchange market where large banks and institutions trade directly with one another.
- LiquidityThe ease with which an instrument can be traded in size without materially moving its price.
Frequently asked questions
What does Cross Rate mean in forex trading?
An exchange rate between two currencies derived from, or quoted without reference to, the US dollar.
How does Cross Rate work in practice?
Because crosses can be synthesised, arbitrage keeps the quoted cross close to its implied value; persistent gaps are quickly closed by banks and automated systems. For a trader, the practical uses are hedging out unwanted dollar exposure and expressing relative strength views directly. The caveat is cost: unless the cross has genuine direct liquidity, the derived spread makes short-term trading expensive, and execution can deteriorate when either underlying dollar leg becomes illiquid.
What is an example of Cross Rate?
With EUR/USD at 1.0850 and USD/JPY at 152.40, the implied EUR/JPY cross rate is 1.0850 multiplied by 152.40, or about 165.35.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.