Currency pairs explained


 

Different types of currency pairs

As you’ve now learnt, the US dollar is by far the most frequently traded currency in the world. As a result most currencies are quoted against US dollar. However, there are several different types of currency pairs used when referring to forex trading, each of which are split into groups depending on the amount of trading activity and liquidity. These are known as majors, minors (or crosses) and last but not least exotic pairs.

Major currency pairs

The most traded currency pairs in the world are called the majors. They are generally the most liquid and attractive to all types of forex traders. The EURUSD is by far the most traded pair, representing close to 30% of all daily forex trades on the entire forex market. Currencies not classed as major currencies, but are normally traded against a major currency are called minor currencies and crosses.

Currency pair Currencies Countries
EURUSD Euro/US dollar Eurozone/United States
GBPUSD British pound/US dollar United Kingdom/United States
USDJPY US dollar/Japanese Yen United States/Japan
USDCHF US dollar/Swiss franc United States/Switzerland
USDCAD US dollar/Canadian dollar United States/Canada
AUDUSD Australian dollar/US dollar Australia/United States
NZDUSD New Zealand dollar/US dollar New Zealand/United States

 

Minor currency pairs and crosses

Currency pairs that do not contain the US dollar are known as ‘crosses’. A currency pair involving a major non-US dollar currency, would also be known as a ‘minor currency pair’.

The most common crosses are pairs derived from the three major non-US dollar currencies - Euro, Great British Pound and Japanese Yen. For example, pairs that involve the euro are called ‘euro crosses’. Below is a list of euro, pound, yen and other crosses.


Euro (EUR) crosses

Symbol Currencies
EURGBP Euro/British pound
EURCHF Euro/Swiss franc
EURAUD Euro/Australian dollar
EURCAD Euro/Canadian dollar

Pound (GBP) crosses

Symbol Currencies
GBPAUD British pound/Australian dollar
GBPCAD British pound/Canadian dollar
GBPCHF British pound/Swiss franc
GBPNZD British pound/New Zealand dollar

Yen (JPY) crosses

Symbol Currencies
GBPJPY British pound/Japanese yen
EURJPY Euro/Japanese yen
CHFJPY Swiss franc/Japanese yen
CADJPY Canadian dollar/Japanese yen
AUDJPY Australian dollar/Japanese yen
NZDJPY New Zealand dollar/Japanese yen

Other crosses

Symbol Currencies
AUDCAD Australian dollar/Canadian dollar
AUDNZD Australian dollar/New Zealand dollar
AUDCHF Australian dollar/Swiss franc
CADCHF Canadian dollar/Swiss franc
NZDCAD New Zealand dollar/Canadian dollar
NZDCHF New Zealand dollar/Swiss franc

Exotic currency pairs

Trading exotic pairs offers you exposure to a wide range of developing and emerging market economies across Asia, the Middle East and Africa. In general, exotic pairs are not traded as often as majors or crosses, which in turn means they are not very liquid markets and lack consistent market activity.

There are often pros and cons associated with trading exotic currency pairs. Because they are not so widely traded, they can often be subject to higher trading fees, however when the market moves they can be subject to some wild price fluctuations (suitable for the more experienced trader). Below is a list of some of the main currency pairs referred to when talking about exotic pairs.

Currency pair Currencies Countries
USDSEK US dollar/Swedish krona United States/Sweden
USDNOK US dollar/Norwegian krone United States/Norway
USDTRY US dollar/Turkish lira United States/Turkey
USDMXN US dollar/Mexican peso United States/Mexico
USDZAR US dollar/South African rand United States/South Africa
USDPLN US dollar/Polish zloty United States/Poland
USDSGD US dollar/Singapore dollar United States/Singapore

Nicknames

In forex, many currency pairs (especially the majors) have particular nicknames which are commonly used in the market. Many even have an interesting story as to why they were even nicknamed that in the first place. For example, the FX pair GBPUSD is also known as ‘cable’. This dates back to the 19th century, when a communications cable ran across the Atlantic Ocean floor to get the exchange rate between the US dollar and the British pound.

In some cases, the currency by itself is known by a different name. For example, the US dollar is often referred to as the ‘greenback’, while you may hear the British pound referred to as ‘sterling’. Below are a list of the most popular currency pair nicknames.

GBPUSD → Cable

EURUSD → Fiber

EURGBP → Chunnel

USDCAD → Loonie

AUDUSD → Aussie

NZDUSD → Kiwi

GBPJPY → Guppy

EURJPY → Yuppy

USDCHF → Swissy


Currency codes

Currencies are often abbreviated to a three-letter currency codes. The first two letters symbolise the name of the country, while the third is the country’s currency. Let’s look at a few examples…

GBP → ‘GB’ stands for Great Britain, while the ‘P’ stands for Pound

USD → ‘US’ stands for United States, the ‘D’ stands for Dollar

JPY → ‘JP’ stands for Japan, the ‘Y’ stands for Yen

In trading you will hear a lot about 'pips' and 'spreads'. Learn about pips in forex, and how different factors can influence spreads.

Next trading guide: Understanding pips and spreads

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