WHAT IS FOREX CURRENCY PAIR?
A forex pair is a combination of two currency that are traded against each other. Example Currency pair EUR/USD Means Euro against US-dollar. In any foreign exchange transaction you are simultaneously buying one currency and selling another. If you were to buy the EURUSD and the euro strengthened against the dollar, you would then be in a profitable trade.
There are more than 180 currencies worldwide the U.S. dollar is involved in a majority of forex trading. Some of most popular pair include the euro against the US dollar (EUR/USD), the US dollar against the Japanese yen (USD/JPY) and the British pound against the US dollar (GBP/USD).
Why the US-dollar is most traded currency?
There are several reasons for its popularity. Firstly, the US is the world’s largest economy and a powerhouse in international trade. Secondly, the US dollar is the world’s primary ‘reserve currency’, held by central and commercial banks for the purposes of international transactions and investment – estimated to make up nearly 63% of currency reserves by volume. And thirdly, many commodities are priced in dollars, including gold, oil and copper.
What are types of forex currency pair?
- Major currency pair
- Minor currency pair
- Exotic currency pair
MAJOR CURRENCY PAIRS
Major pairs are the most widely traded currencies in the foreign exchange market that include the US dollar (USD), which currently holds the position of the largest economy in the world. There are seven major currency pair as listed below
1.The Euro and US dollar: EUR/USD
2.The US dollar and Japanese yen: USD/JPY
3.The British Pound Sterling and US dollar: GBP/USD
4.The US dollar and Swiss franc: USD/CHF
5.The Australian dollar and US dollar: AUD/USD
6.The US dollar and Canadian dollar: USD/CAD
7.The New Zealand dollar and US dollar: NZD/USD
MINOR CURRENCY PAIRS
Minor or crosses currency pairs, are pairs that do not include the U.S. dollar, but do include at least one of the world's other three major currencies. the Japanese yen(JPY), British pound (GBP) and the euro (EUR). Minor currency also known as "Crosses currency"
Japanese Yen Crosses
- EUR/JPY
- GBP/JPY
- CHF/JPY
- CAD/JPY
- AUD/JPY
- NZD/JPY
British Pound Crosses
- GBP/CHF
- GBP/AUD
- GBP/CAD
- GBP/NZD
Euro Crosses
- EUR/CHF
- EUR/GBP
- EUR/CAD
- EUR/AUD
- EUR/NZD
The most traded minor pairs
- EUR/GBP
- EUR/JPY
- GBP/JPY
- GBP/CAD
- CHF/JPY
- EUR/AUD
- NZD/JPY
EXOTIC CURRENCY PAIRS
Exotic currency pairs are the third most traded in the forex market. These pair include the combination of one currency from seven major currencies and a currency from a developing or emerging economy such as Brazil, Mexico, Chile, Turkey, Hungary, Singapore, Sweden, etc.
Understand that these pairs aren’t as heavily traded as the “majors” or “crosses pair,” so the transaction costs associated with trading these pairs are usually bigger.
List of Exotic Currency Pair below
- AUD/NOK (Australian Dollar/Norwegian Krone)
- AUD/PLN (Australian Dollar/Polish Zloty)
- AUD/SEK (Australian Dollar/Swedish Krona)
- AUD/SGD (Australian Dollar/Singapore Dollar)
- CAD/SGD (Canadian Dollar/Singapore Dollar)
- CHF/SEK (Swiss Franc/Swedish Krona)
- CHF/SGD (Swiss Franc/Singapore Dollar)
- EUR/CZK (Euro/Czech Republic Koruna)
- EUR/HUF (Euro/Hungarian Forint)
- EUR/NOK (Euro/Norwegian Krone)
- EUR/PLN (Euro/Polish Zloty)
- EUR/RON (Euro/Romanian Leu)
- EUR/RUB (Euro/Russian Ruble)
- EUR/SEK (Euro/Swedish Krona)
- EUR/SGD Singapore Dollar)
- EUR/TRY (Euro/Turkish Lira)
- EUR/ZAR (Euro/South Africa Rand)
- GBP/CZK (British Pound/Czech Republic Koruna)
- GBP/HUF (British Pound/Hungarian Forint)
- GBP/MXN (British Pound/Mexican Peso)
- GBP/NOK (British Pound/Norwegian Krone)
- GBP/PLN (British Pound/Polish Zloty)
- GBP/SEK (British Pound/Swedish Krona)
- GBP/SGD (British Pound/Singapore Dollar)
- GBP/TRY (British Pound/Turkish Lira)
- MXN/JPY (Mexican Peso/Japanese Yen)
- NOK/JPY (Norwegian Krone/Japanese Yen)
- SGD/JPY (Singapore Dollar/Japanese Yen)
- TRY/JPY (Turkish Lira/Japanese Yen)
- ZAR/JPY (South Africa Rand/Japanese Yen)
- USD/CZK (US Dollar/Czech Republic Koruna)
- USD/HUF (US Dollar/ Hungarian Forint)
- USD/ILS (US Dollar/Israeli Shekel)
- USD/MXN (US Dollar/Mexican Peso)
- USD/NOK (US Dollar Norwegian Krone)
- USD/PLN (US Dollar/Polish Zloty)
- USD/RON (US Dollar/Romanian Leu)
- USD/RUB (US Dollar/Russian Ruble)
- USD/SEK (US Dollar/Swedish Krona)
- USD/SGD (US Dollar/Singapore Dollar)
- USD/THB (US Dollar/Thai Baht)
- USD/TRY (US Dollar/Turkish Lira)
- USD/ZAR (US Dollar/South Africa Rand)
What is a base and quote currency?
The base currency is the first currency in any currency pair is also known as the transaction currency.
The quote currency is the second currency in any currency pair known as the counter currency.
Quote currency show many units of the quote currency they will need to exchange for one unit of base currency.
EXAMPLE; EURUSD
