A cross rate is a foreign currency exchange transaction between two currencies that are both valued against a third currency. In the foreign currency exchange markets, the U.S dollar is the currency that is usually used to establish the values of the pair being exchanged.
The
calculation of cross rates involves the exchange market price made in two
currencies which are then valued to a third currency. During the process, two
transactions are being computed. The first being the individual trading their
one specific currency (EUR, JPY, GBP) for that same equivalent value in U.S
dollars. Once U.S dollars have been received, an exchange occurs again when the
U.S dollars are traded for the second specific currency.