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Pips

The spread is expressed in units called ticks, points, or pips (an acronym for “price interest point”). A pip is the smallest unit a currency is traded in. It is represented by the last number on the right side of the price. For example, the Japanese yen is calculated to 2 percentage points. A bid/ask quote for the Japanese yen against the U.S. dollar might look like 109.23/28. In this case, the smallest unit is 0.01, which equals one pip. Therefore, the difference between the two figures—0.05—is expressed as five pips. The euro and the pound are both calculated to four decimal points. One pip therefore equals 0.0001 of the currency.

If the Japanese yen climbs from 105.05 to 105.08 against the U.S. dollar, for example, it has gained three pips. If the euro jumps from 1.0032 to 1.0072, it has gained 40 pips.


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