Association for Financial Professionals (AFP) Practice Exam

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What does the FX quote USD/JPY 101.45 - 101.53 indicate regarding a dealer's actions?

The dealer will buy one US dollar for JPY 104.53
The dealer will sell one US dollar for JPY 101.53
The dealer will buy one US dollar at JPY 101.45
The dealer will sell 101.45 US dollars for one JPY

The correct answer is: The dealer will buy one US dollar at JPY 101.45

The FX quote USD/JPY 101.45 - 101.53 provides insight into the dealer's buying and selling prices for US dollars in exchange for Japanese yen. The first number in the quote (101.45) represents the bid price, indicating the amount the dealer is willing to pay for one US dollar. The second number (101.53) represents the ask price, which is the amount the dealer is asking for one US dollar. When looking at the correct answer, the statement "the dealer will buy one US dollar at JPY 101.45" aligns with the bid price. It means that if a trader wants to sell US dollars to the dealer, they can do so at a rate of 101.45 Japanese yen per US dollar. This is a standard interpretation of FX quotes, where the dealer's bid price reflects their buying position. The context of the quote ensures clarity on the roles of the bid and ask prices in foreign exchange transactions. Understanding this quote structure is crucial for evaluating how dealers set prices based on current market conditions and for executing trades accordingly.