What is a European Term?

Mary McMahon
Mary McMahon

A European term is a convention in foreign exchange quoting where the quote is given in terms of how many units of the European currency are needed to buy a foreign currency, most commonly United States Dollars (USD). This convention may be used in a variety of settings by traders working in foreign currency, as well as in money changing facilities. As an example, someone might quote 1.385 euros/USD, meaning it takes 1.385 euros to buy $1 USD.

Rapid developments in the exchange rate must be a consideration for people who engage in currency trading.
Rapid developments in the exchange rate must be a consideration for people who engage in currency trading.

When a European term is used in Europe, the domestic currency is denoted in terms of a foreign currency. People may find this useful for reference in a variety of settings; if a transaction is being conducted in a foreign currency, for example, offering a quote in a European term allows people to instantly convert so they understand how much domestic currency will be required to complete the transaction. People can also flip the European term, making a quote in dollar terms, for example, for a quote like .732 USD/EUR, providing information about how many dollars it takes to buy a euro.

An example of a European term may be comparing the value of the euro to the dollar.
An example of a European term may be comparing the value of the euro to the dollar.

People engaging in currency trading must keep up with rapid developments in the exchange rate and may have a preference for the terms used in quotes. People can make both bid and ask quotes in European terms, telling other traders how much they are willing to accept for their currency and how much they are willing to pay for a given currency. These quotes are influenced by the going exchange rate and also have the effect of pushing the exchange rate up and down as people respond to supply and demand pressures.

It is very clear when a quote is a European term, as it will list the European currency and amount first, followed by a foreign currency value. The Euro is the most widely traded and used European currency, thanks to its adoption by many EU member nations, and people can also make trades in other European currencies, if desired. Worldwide, the euro is second only to the US dollar in terms of volume and frequency of trading and it is a very widely used, known, and accepted currency.

For travelers changing money, it is important to track foreign exchange rates and to pay attention to quotes. People should be aware that along with the losses involved in changing currency back and forth, they will also typically need to pay fees for money changing. The fees should be disclosed up front before the transaction occurs and they can vary considerably, making comparison shopping advisable if people have several resources for changing money available.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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