02/03/2023
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Today Topic : Types of Currency Pairs in forex| what is forex pairs| major currency pairs in forex
The price at which traders can sell currency is the bid (SELL) price, and the price at which they can buy currency is the ask (BUY) price. But keep in mind that the terminology used for "bid" and "ask" is from the perspective of the broker because it is only natural to think of "bid" in terms of purchasing.
The goal of traders is to either acquire foreign exchange at a low price and sell it at a higher price, or to sell foreign exchange in expectation of a future depreciation and repurchase it at a lower price.
Spreads Usually, the cost to buy a currency is higher than the cost to sell it. The broker makes money on this distinction, which is known as the spread.
Major Currency Pairs
A widely traded currency pair is the euro against the U.S. dollar or shown as EUR/USD. In fact, it is the most liquid currency pair in the world because it is the most heavily traded.
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The quotation EUR/USD = 1.2500 means that one euro is exchanged for 1.2500 U.S. dollars. In this case, EUR is the base currency and USD is the quote currency (counter currency). This means that 1 euro can be exchanged for 1.25 U.S. dollars. Another way of looking at this is that it will cost you $125 to buy 100 euros.
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.S. dollar are referred to as the major currencies, which include:
EUR/USD or the Euro vs. the U.S. dollar
USD/JPY or dollar vs. the Japenese yen
GBP/USD or the British pound vs. the dollar
USD/CHF or the Swiss franc vs. the dollar
AUD/USD or the Australian dollar vs. the U.S. dollar
USD/CAD or the Canadian dollar vs. the U.S. dollar
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.m. U.S. Eastern time.
Minors and Exotic Pairs
Currency pairs that are not associated with the U.S. dollar are referred to as minor currencies or crosses. 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. Some examples of crosses include the EUR/GBP, GBP/JPY, and EUR/CHF.
Exotic currency pairs include currencies of emerging markets. These pairs are not as liquid, and the spreads are much wider. An example of an exotic currency pair is the USD/SGD (U.S. dollar/Singapore dollar).
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