In fact, it is the most liquid currency pair in the world because it is the most heavily traded. This means that 1 euro can be exchanged for 1. There are as many currency pairs as there are currencies in the world. The total number of currency pairs that exist changes as currencies come and go. All currency pairs are categorized according to the volume that is traded on a daily basis for a pair. The currencies that trade the most volume against the U. The final two currency pairs are known as commodity currencies because both Canada and Australia are rich in commodities and both countries are affected by their prices.

The major currency pairs tend to have the most liquid markets and trade 24 hours a day Monday through Thursday. The currency markets open on Sunday night and close on Friday at 5 p. Eastern time.

Currency pairs explained

Currency pairs that are not associated with the U. These pairs have slightly wider spreads and are not as liquid as the majors, but they are sufficiently liquid markets nonetheless. The crosses that trade the most volume are among the currency pairs in which the individual currencies are also majors. Exotic currency pairs include currencies of emerging markets. These pairs are not as liquid, and the spreads are much wider. Bank for International Settlements. Accessed Feb. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.

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Personal Finance. Your Practice. Popular Courses. Part Of. Basic Forex Overview. Key Forex Concepts. Currency Markets. Advanced Forex Trading Strategies and Concepts. Table of Contents Expand.

1. Major Pairs.
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What Is a Currency Pair? Understanding Currency Pairs. Major Currency Pairs. Minors and Exotic Pairs. Key Takeaways A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold. Article Sources.

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• Forex Currency Pairs: The Ultimate 2021 Guide + Cheat Sheet.

Compare Accounts. A currency pair is a quotation for two different currencies. It is the amount you would pay in one currency for a unit of another currency. Below we explore the major currency pair categories. The most traded currency pairs are listed below. Higher volumes tend to lead to smaller spreads.

Major Currency Pairs

High volumes lead to reduced price differences between the bid and offer. The Yen is often used by carry traders who borrow the Yen and invest it into higher yielding currencies. The Bank of Japan has had to combat low inflation and growth for many years, and as a result it has a very low interest rate. The Yen is also known as a safe-haven currency amongst traders. Commodity currencies like the Aussie, Loonie and Kiwi are forex pairs that are greatly influenced by commodity prices.

The Aussie also tends to do well when China does well because the two countries are big trading partners. Interestingly, the Canadian dollar is closely tied to the US economy. Cross currency pairs do not include the US Dollar.

Historically, currencies had to be exchanged into US dollars before they could be exchanged into other currencies. This cross pair explores the relationship between the UK economy and the European Union. The main fundamentals that affect currency pairs are changes in overnight interest rates by central banks, economic data and politics.

Interest Rates - Central banks have it in their mandate to maintain monetary and financial stability. They do this by influencing interest rates. When a central bank increases its overnight interest rate it causes increased demand for that currency because investors and traders seek the higher yield which in turn appreciates the currency relative to other currencies.

Currency Pair

Important economic data that influences currency rates include CPI inflation data, Nonfarm payrolls employment data , gross domestic product GDP , retails sales, purchasing managers index PMI and others. Politics - Trade wars , elections, corruption scandals and changes in policies introduce instability which reflects in the forex market. Volatility - Traders usually take smaller positions on the more volatile currencies and bigger positions on less volatile positions.

Volatility can strike any of these pairs at any time due to abrupt changes in interest rates, drastic changes to the economic outlook, or political instability. It is important to follow these markets dedicated pages above for up to date news and analysis. Forex traders utilize discipline and consistency in their trading. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances.

Forex trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Sign up now to get the information you need!