Reciprocal Currency

So we all know the U.S. is number one. In what exactly, other than Olympic backstroke events? Well, that’s never been important. But we have a theory: we're number one in currency exchanges.

In every currency exchange transaction, there’s a “base currency,” which is what the transaction is quoted in. For instance, if you were switching out some USD for Japanese yen, you’d probably want to know how much yen you’re getting in USD terms. If you’re American, that is.

Foreign currency exchanges oftentimes use USD as the base currency. Lots of people around the world use the USD to quote other currencies in. This is normal. But when USD is involved in a transaction, and it isn’t the base currency; that currency is called a reciprocal currency.

If you were Japanese rather than American, doing a yen-to-USD transaction, you’d probably want the base currency to be Japanese yen. How many yen am I getting when I am buying those greenbacks? In this case, the reciprocal currency is the yen. The exchange will be quoted in USD per one yen. Reciprocal currencies are quoted as dollars per unit of the other currency, rather than units of currency per U.S. dollar.