When trading currencies in the forex markets you will always see them quoted in pairs.
There are many currency pairs traded in the forex markets but some are more traded than others.
These most traded currency pairs are known as Major Pairs.
There are seven major pairs traded and these are;
The Major Currency Pairs
All Major pairs contain the US Dollar on either the base side or quote side.
The major pairs make up the largest share of the activity in the forex markets at about 85%.
Because of their large activity,major pairs tend to exhibit higher market liquidity.
Below we have written a brief summary for each major pair.
The euro and the U.S. dollar (EUR/USD)
The EUR/USD is the currency pair of the European Union (euro) and the United States (USD).
The pair makes up a daily trade volume of nearly 30 percent of the forex markets, making it the most popular currency pair.
The British pound sterling and the U.S. dollar (GBP/USD)
The GBP/USD is the currency pair of the United Kingdom (GBP) and the United States (USD).
GBP/USD is the third most traded currency pair and makes up around 14 percent daily trading volume.
The U.S. dollar and the Japanese yen (USD/JPY)
The USD/JPY is the currency pair of the United States (USD) and Japan (JPY).
USD/JPY is the second most traded currency pair with a daily turnover of approximately 17.7% of the forex markets.
The U.S. dollar and the Swiss franc (USD/CHF)
The USD/CHF is the currency pair of the United States (USD) and Switzerland (CHF).
USD/CHF is one of the most popular traded currency pairs.
Despite this pair having lower liquidity Switzerland holds one-third of the world’s privately owned wealth in its banks.
Other Types Of Currency Pairs
For currencies that are not paired with the US Dollar they are known as cross-currency pairs or crosses.
The most traded cross pairs consist of the Euro, the UK Pound and Yen which make up the three main currencies beside the US dollar.
These currency pairs are also known as minors and there are fourteen minor pairs in total.
Some of the minor pairs include;
Currencies of emerging or a strong but smaller economies such as Hong Kong Dollar can be also traded.
These currencies are paired with major currencies and are called exotic pairs.
Exotic pairs are not traded as often as the majors or minors currency pairs.
As a result the cost of trading these pairs can be higher due to the lack of liquidity in these markets.
Some of the exotic pairs include;
- USD/HKD US Dollar/Hong Kong Dollar.
- USD/SGD US Dollar/Singapore Dollar.
- USD/SEK US Dollar/Swedish Krona.
- EUR/TRY Euro/Turkish Lira.