Cross-Rate Law and Legal Definition

Cross-rate refers to an exchange rate between two currencies. It is expressed as the ratio of two foreign exchange rates in terms of a common third currency. Common third currency is usually the U.S. dollar. Foreign exchange rate dealers use cross-rate tables to look for arbitrage opportunities.

Cross-rate is expressed by a currency pair in which none of the currencies involved is the official currency of the country in which this quotation is made. For example, if the currency exchange rate between a Japanese yen and a British pound is quoted in the U.S. newspaper, this would be called a cross rate since none of the currencies of this pair is the U.S. dollar. However, if the same rate is quoted in a Japanese newspaper, it would not be a cross rate, since Japan’s official currency is involved in this pair.