What is a cross rate? How exchange rates are worked out between two currencies
By SendPay Business · · 2 min read
A cross rate is the exchange rate between two currencies that is worked out from each one's rate against a third currency, usually the US dollar. Traders use the term for any pair that doesn't include the dollar, such as EUR/GBP or GBP/JPY.
How a cross rate is worked out
- Take each currency's rate against the same third currency, for example EUR/USD and GBP/USD.
- Divide one by the other: EUR/USD divided by GBP/USD gives EUR/GBP.
- So if EUR/USD is 1.10 and GBP/USD is 1.30, EUR/GBP is about 0.846, meaning one euro buys about 0.846 pounds.
Why cross rates exist
Many currencies trade most heavily against the US dollar. When there is less direct trading between two other currencies, their rate is often found by going through the dollar. Busy pairs such as EUR/GBP trade directly too, and the direct and worked-out rates stay very close.
Why it matters when you exchange money
The rate you are quoted is usually a cross rate plus the provider's margin. Comparing it with the mid-market rate shows how much you are really paying on top of any fixed fee.
Where SendPay fits
SendPay platforms can give your customers GBP, EUR and USD accounts with currency exchange between them, at a fee you set, under your own brand and powered by licensed partners.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.