What Is a Base Currency & Why It Matters in Trading

Getting the base currency right is the simplest way to make better forex decisions. In any pair, the base is the unit you buy or sell, the quote currency is the price you pay per unit, and your functional currency is the bookkeeping currency where your PnL and margin ultimately land.

This guide explains base currency and why it matters in trading, shows how it affects trade size, pip value, and margin, and clears up the differences with quote and functional currencies.

What Is a Base Currency

A base currency is the first currency shown in a pair. The price tells you how much of the quote currency you need for one unit of the base. It is the unit you buy or sell and it drives position size, pip value, PnL, margin, and account conversions.

Examples

• EURUSD base is EUR
• USDJPY base is USD
• GBPCHF base is GBP

FX is huge and fast moving. Daily turnover reached about 9.6 trillion dollars in April 2025 according to reporting on the BIS triennial survey, so small misunderstandings compound quickly.

How Base Currency Affects Trade Size and Margin

Understanding the base currency (the first currency in a pair) is crucial because your trade size is measured in units of the base, while your margin is calculated from the position’s notional value in the quote currency and then converted into your account (functional) currency if needed.

Example EURUSD with a USD Account

• Pair: EURUSD → Base = EUR, Quote = USD
• Trade: Buy 1 standard lot at 1.1000
• Notional: 100,000 EUR × 1.1000 = 110,000 USD
• Leverage 1:30: Margin = 110,000 ÷ 30 = 3,666.67 USD
• Leverage 1:100: Margin = 110,000 ÷ 100 = 1,100 USD
• Pip value: ≈ $10 per pip per standard lot (because account = quote)

The “100,000” you bought is EUR (base). All risk sizing, pip math, and margin stem from that unit choice.

Example 2 USDJPY with a EUR Account

• Pair: USDJPY → Base = USD, Quote = JPY
• Trade: Sell 1 standard lot at 150.00
• Notional in quote: 100,000 USD × 150.00 = 15,000,000 JPY
• Leverage 1:50: Margin (JPY) = 15,000,000 ÷ 50 = 300,000 JPY
• Convert to account (EUR): assume EURUSD = 1.1000 ⇒ 1 USD = 0.9091 EUR and USDJPY = 150.00 ⇒ 1 JPY ≈ 0.006667 USD
  300,000 JPY × 0.006667 USD/JPY = 2,000 USD
  2,000 USD × 0.9091 EUR/USD ≈ 1,818 EUR

Your PnL accrues in JPY first (the quote), but margin and PnL ultimately show up in EUR (your functional/account currency). Knowing the base clarifies which leg you’re truly sizing.

If your account is not quote, your platform converts the pip value into your account currency using the live rate, expect small fluctuations.

Top Common Base Currencies

Below are the base currencies you’ll encounter most often in spot FX and CFD trading, plus where you’ll typically see them as the left-hand (base) side of a pair.

Major FX Bases

USD — U.S. Dollar
Common as base in USDJPY, USDCAD, USDCHF; appears as quote in EURUSD, GBPUSD, AUDUSD, NZDUSD.

EUR — Euro
Base in EURUSD, EURJPY, EURGBP, EURCHF, EURAUD, EURNZD, EURCAD.

JPY — Japanese Yen
Usually the quote (e.g., USDJPY, EURJPY, GBPJPY), but still a core leg in many majors and crosses.

GBP — British Pound
Base in GBPUSD, GBPJPY, GBPCAD, GBPCHF, GBPAUD, GBPNZD, GBPEUR.

AUD — Australian Dollar
Base in AUDUSD, AUDJPY, AUDNZD, AUDCAD, AUDCHF, AUDEUR.

CAD — Canadian Dollar
Often the quote versus USD (USDCAD), but base in CADJPY, CADCHF, CADSGD, CADNOK on some platforms.

NZD — New Zealand Dollar
Base in NZDUSD, NZDJPY, NZDCAD, NZDCHF, NZDEUR, NZDGBP, NZDAUD.

CHF — Swiss Franc
Often the quote versus USD (USDCHF), but base in CHFJPY, CHFEUR, CHFGBP on certain venues.

Commodities/Metals as Base (CFDs/Spot)

• XAU — Gold, XAUUSD
• XAG — Silver, XAGUSD

Crypto Pairs (Venue-Dependent)

• BTC — Bitcoin, BTCUSD, BTCUSDT
• ETH — Ethereum, ETHUSD, ETHUSDT

Base Currency vs Quote Currency vs Functional Currency

The base currency is the unit being bought or sold, the quote currency is the amount you pay or receive per one unit of the base, and your functional currency is the bookkeeping currency you use to report results. Getting these right keeps your pricing, pip values, PnL, and reports consistent across platforms and statements.

Base Currency
The first currency in a pair. It is the unit you buy or sell.
Example: In EURUSD, EUR is the base.

Quote Currency
The second currency in a pair. It is the price you pay or receive per one unit of the base.
Example: In EURUSD, USD is the quote.

Functional Currency
The currency of the primary economic environment where you operate or keep your books. It is used for accounting and reporting, not for how pairs are displayed.
Examples: A Malaysia-based trader may use MYR. A US broker reports in USD. An EU exporter typically reports in EUR.

Common Mistakes To Avoid

Assuming USD Is Always The Base
Pairs like EURUSD and GBPUSD have USD as the quote. Always read the left currency as the base.

Sizing By Lots Without Converting To Units
One lot equals 100000 units of the base in FX. Translate lots into base units before any risk math.

Forgetting That Pip Value Depends On The Quote
When your account currency is different from the quote, pip value will float with the conversion. Verify pip value in your account currency.

Ignoring Margin Conversion
Margin is calculated from notional in the quote currency and then converted to your account currency. Expect small differences as rates move.

Conclusion

Treat the base currency as your anchor for every decision. It tells you what one unit of the pair represents, drives how you size trades, and shapes margin and PnL once conversions hit your account currency. When you identify the base first, your pricing, pip value, and risk math all line up.