Definition: A cross rate refers to the exchange rate between two currencies, neither of which is the official currency of the country in which the exchange rate quote is given. It typically involves calculating the exchange rate by using a common currency, such as the US dollar, as an intermediary.
For example, to determine the cross rate between the Euro (EUR) and the Japanese Yen (JPY), one might use the exchange rates of both currencies against the US dollar (USD) as a reference. If the EUR/USD rate is 1.20 and the USD/JPY rate is 110, the cross rate between EUR and JPY would be calculated as follows: 1.20 * 110 = 132, meaning 1 EUR = 132 JPY.
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