What are Direct and Indirect quote in foreign exchange transactions?

There are two ways to quote a currency pair, known as direct quote and indirect quote. A direct currency quote or home currency quote is simply a currency pair in which the domestic currency is the quoted currency and the foreign currency is the base currency. In the other words, the direct quote varies the domestic currency, and the base, or foreign currency, remains fixed at one unit. For example 1 USD=Rs.74/- is the direct rate. Direct quote is used in India.

In the indirect quote, on the other hand, the foreign currency is variable and domestic currency remains fixed at one unit . For example, 1 Re= 0.0135 USD or Rs.100=1.3513 USD is the indirect quote.Indirect quotation is also known as a “price quotation,” since it expresses the price of one unit of a foreign currency in terms of the domestic currency.

In the direct quote, a lower exchange rate implies that the domestic currency is Appreciating.An indirect quote is the opposite or reciprocal of a direct quote, a lower exchange rate implies that the foreign currency is Appreciating. Normally currency of buyer’s country is converted into currency of seller’s country. However many times the funds may be converted into permitted currency of third country ( like USD, Euro, Sterling Pound etc. which are accepted in almost all the countries) acceptable to buyer and the seller/service provider.