Convert a pip move into cash impact
Estimate the cash impact of a pip move on a foreign-currency amount using the quote currency.
EUR/USD moved from 1.0800 to 1.0875 while the company has a EUR 500,000 supplier payable. For EUR/USD, a one-pip move is usually 0.0001 USD per EUR. Cash impact for a EUR amount is exposure amount times the decimal rate move. The common trap is saying "75 pips" as if the number is self-explanatory. Without the exposure amount and quote currency, the manager cannot tell whether the move is immaterial, tolerable, or budget-changing. Step 1 1.0875 - 1.0800 = 0.0075 Find the decimal move in the quoted pair. EUR/USD rose, so each EUR costs more USD. Step 2 0.0075 / 0.0001…
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