Inversion

1. A term used in foreign exchange rate quotation.

Consider the historical FX quote of 1 GBP = USD 1.4598 - 1.4602. The base currency is GBP.

The inversion of this FX quote means expressing the same price, but with the other currency as the base currency (USD here).

So 1 USD = GBP [1/1.4602] - [1/1.4598]

1 USD = GBP 0.6848 - 0.6850.

2. In any market, the reversal of a normal - or commonly expected - relationship.

For example the situation of an Inverse yield curve, where longer maturities of funds are trading at LOWER yields than shorter-dated maturities (being the opposite of the normally expected upward-sloping relationship).

See also

• Base currency
• Foreign exchange
• Inverse quote
• Inverse yield curve