Cable is a slang term used among forex traders referring to the exchange rate between the U. It can also be used to refer simply to the British pound sterling.
Since the pound versus the dollar is one of the most commonly traded currency pairs , the term is heard frequently in trading rooms. Cable only refers to the British pound with reference to prices and trading against the dollar. You may hear someone dealing in the forex market say "Cable is up today" or "Cable has been trending lower lately. The pound was the dominant currency at the time, and transactions between the pound and dollar were executed via transatlantic cable.
Forex traders are sometimes referred to as "cable dealers. The British pound or pound sterling is considered the oldest currency still in usage. It was the world's dominant currency for centuries, and thus was considered the primary reserve currency in which other nations held their excess cash.
As the British Empire dominated global commerce, the pound dominated international finance. It was legal tender in most colonies, including large portions of Africa and Asia. The Empire began to fade following World War I, as the enormous economic cost of the war took a toll on the economy. With the British government heavily in debt to the United States, the dollar began to assume the reserve currency status that the pound had held.
This change was complete by , when the British government was forced to devalue the pound by By the early part of the 21st century, the dollar was the world's leading reserve currency, followed by the euro. The pound has settled in third place. In foreign exchange , the base currency is the one against which all others are compared.
When the pound was the world's dominant currency, it was also the base currency for trading, so a price quote indicated the amount of currency X that needed to be exchanged for the pound. It is still the base currency in trades against the U. But when the euro started trading on Jan. Pricing for cable is thus the number of dollars it takes to buy one pound. Dictionary Term Of The Day.
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