1.2 Currencies Are Traded in Pairs

Currency pairs picture
As we noted in the earlier chapter, currencies are bought or sold in ‘pairs’. Each currency in the pair represents a country whose economy may be stronger or weaker thanthat of the other currency in the pair. Changes in this ratio of strength cause changes in the value of the pair. Currency pairs traded in the FX market may be grouped into major, minor and exotic pairs.
 
 
The ‘major’ currency pairs are distinguished by the fact that the U.S. dollar is a participating currency on any one side of the pair. They are called majors because they represent the most heavily traded group of currency pairs in the world.
 
 
major currency pairs and their nick names
 
 
Minor pairs are currency pairs that do not contain the U.S. dollar. They are also known as ‘crosses’. Here is a table of the minors:
 
various minor currency crosses
 
 
Exotic pairs team up a currency from the emerging group of economies with a major currency. Here is a list (not exhaustive) of the ‘exotics’:
 
Exotic currency pairs and countries
 
 
Since the exotics are not traded so frequently as the majors or minors, trading these pairs means higher transaction costs because the spread will likely be much more.
 
 
 
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