American Terms for Foreign Exchange Trades

E

"European terms" refers to the number of foreign currency units per U.S. dollar.

When referring to foreign exchange trades, "American terms" typically refers to the quoting convention used in the United States. It specifies the number of U.S. dollars required to buy one unit of foreign currency. Therefore, the correct answer is option E: the number of U.S. dollars per unit of foreign currency.

To understand this concept better, let's compare it with "European terms," which is another quoting convention used in some regions outside the United States. In European terms, the quote represents the number of units of foreign currency required to buy one U.S. dollar. In other words, it indicates the amount of foreign currency per U.S. dollar.

For example, if the American terms for the exchange rate between the U.S. dollar (USD) and the euro (EUR) is 1.20, it means that one U.S. dollar is equal to 1.20 euros. On the other hand, in European terms, the same exchange rate would be expressed as 0.83 (1 divided by 1.20), indicating that 0.83 euros are needed to buy one U.S. dollar.

Therefore, when dealing with American terms, you will see quotes such as USD/EUR 1.20, where the first currency (USD) represents the base currency, and the second currency (EUR) represents the quote currency. The quote tells you how many U.S. dollars are required to buy one unit of the foreign currency (in this case, euros).

In summary, American terms in foreign exchange trades refer to the quoting convention where the exchange rate indicates the number of U.S. dollars required to buy one unit of foreign currency.