[Solved] Which of the following is TRUE about the 'cross rate' in the foreign exchange market? — Ans: It is the exchange rate between two currencies calculated using a third currency | Economic Awareness

Economic Awareness - Sectors of Indian Economy

Which of the following is TRUE about the 'cross rate' in the foreign exchange market?

AIt is the rate used only for domestic currency transactions

BIt is the official exchange rate fixed by the IMF

CIt is the rate at which central banks lend to commercial banks

DIt is the exchange rate between two currencies calculated using a third currency

Step-by-Step Solution

Step 1: Define cross rate
Cross rate is the exchange rate between two currencies derived from their common exchange rates with a third currency, usually the US dollar.
Step 2: Analyze options
It is not fixed by IMF, not related to central bank lending rates, and not limited to domestic transactions.
Final Answer:
It is the exchange rate between two currencies calculated using a third currency → Option D
Quick Check:
Cross rate = exchange rate via third currency calculation ✅

Quick Trick: Cross rate = currency pair rate via third currency.

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