Economics Currency Decider currency, domestic, question

Siddimaula

How do YOU decide what currency is the domestic currency?!
Is it the one unit in the “$1.65 per pound” quote or is it from the details of where the question says that the company is based?!

cityboy

dubj,
Technically with this quote either currency could be the domestic currency. If the dollar is the domestic currency then it is a direct quote, and if the Euro is the domestic currency it is an indirect quote. It sounds like you have to look at the context of the question to find out what the domestic currency is. For instance if they are talking about a French company, it’s a good bet that Euros are the domestic currency.

OmarAdnan

It’s more for Interest Rate Parity and International Fisher Relation questions

KungFuPanda

so that would be Spot= 1.65 (USD/GBP), so the USD is the domestic?
I’m seeing Schweser answer their questions with USD as the Foreign Currency in $1.65 per Pound, maybe their answers are incorrect?!

joehogue

If you are looking at this in the context of currenty exchange it would be quoted as
Euro = 1.65
which I believe would be a direct currency quote meaning the dollar is the domestic currency and the Euro would be the foreign currency.
Now, if you’re referring to how you would treat this in the context of multinational operations you would be looking for the key words: presentation currency, funtional currency, or local currency. The key word or some context would most likely be given in the vignette.

Houjichasan

usually it is DC/FC or FCC
sometimes question tells you which is which and you may have to invert the given exchange rate.