How does currencies get cross connected?

<p id="isPasted">Cross-currency connections, also known as cross rates, occur when exchange rates between two currencies are determined indirectly through their respective exchange rates with a third currency, typically the US dollar. This allows for the comparison and exchange of currencies without directly involving the US dollar in the transaction.</p><p>Currency Pairs:</p><p>In the foreign exchange (forex) market, currencies are traded in pairs. For example, EUR/USD represents the exchange rate between the Euro and the US dollar.&nbsp;</p><p>Cross-Currency Pairs:</p><p>When a currency pair does not include the US dollar, it's considered a cross-currency pair (or currency crosses). Examples include EUR/JPY (Euro/Japanese Yen) or GBP/CHF (British Pound/Swiss Franc).&nbsp;</p><p>Calculating Cross Rates:</p><p>To determine the exchange rate between two currencies in a cross-currency pair, you use their exchange rates against a common third currency (like the USD).&nbsp;</p><p>For example, to find the EUR/JPY exchange rate, you would use the EUR/USD and JPY/USD exchange rates. You would then divide the EUR/USD rate by the JPY/USD rate, as explained in the article by Bajaj Broking.&nbsp;</p><p>Purpose:</p><p>Cross-currency rates are useful for international trade and finance, enabling businesses and individuals to exchange currencies without directly using the USD. They also allow for hedging and risk management strategies in the forex market.&nbsp;</p><p><br></p>