Pairs mean two things together. In foreign exchange, each currency’s relative value with another foreign currency gets displayed on board for basic currency conversion.
For example EURUSD, euro vs dollar. Here US Dollar is the quote currency and Euro is the base currency.
If EURUSD quotes 1.2500 means, for each 1 euro you will earn $1.25 by converting from euro to dollar. For all currency pairs, 1st currency is the base currency and 2nd currency is the quote currency.
In the case of USDJPY, the base currency is the US dollar (USD) & quote currency is the Japanese Yen (JPY).
If USDJPY gets quotes as 112.00 that means for every $1 you will earn 112.00 Yen. In currency pair quote abbreviation, USDJPY and USD/JPY are the same. “/” (slash) here indicates “vs”.
The relative value of a currency is above stated. Like if EURUSD is quoting 1.25, that means the Eurodollar relative value is 1.25 compared to the US dollar. Most of the trader all of the world uses the relative value of a foreign currency.
The term absolute means an independent value of a currency without any relation to other currencies. In a practical approach, it is a bit difficult to find the absolute value of a currency without comparing it with other currencies. But financial institutions have a separate algorithm to calculate currency index which replicates absolute value. For example, USD index, EUR index, etc.
Different currency pairs
There are a total of 180 currencies available in this world for 195 countries. So with 180 foreign currencies, there can be thousand and more currency pairs combinations possible. But not currencies get trades over the counter. Thus based on their daily trading volume & popularity, these currency pairs can be categorized into 3 sections as explained below:
Major currency pairs
Top major currencies of the world are Eurodollar, US dollar, Pound sterling, Japanese Yen, Australian dollar, Canadian dollar, New Zealand dollar, Swiss franc. They are major because they are highly traded among forex traders, thus having high liquidity.
|EURUSD||Euro vs US Dollar||1.2520||1 Euro = $1.2520|
|GBPUSD||Pound vs US Dollar||1.3155||Pound = $1.3155|
|USDJPY||US Dollar vs Japanese Yen||112.50||1 US Dollar = 112.50 Yen|
|USDCAD||US Dollar vs Canadian Dollar||1.1037||1 US Dollar = 1.1037 CAD|
|AUDUSD||Australian dollar vs US dollar||0.7550||1 AUD = 0.7550 USD|
|NZDUSD||New Zealand Dollar vs US dollar||0.7210||1 NZD = 0.7210 USD|
|USDCHF||US dollar vs Swiss Franc||0.9850||1 USD = 0.9850 CHF|
Cross currency pairs:
Cross-currency pairs are the minor currency pairs that get traded less than the major currency pairs. Thus it has higher spreads than the major currency pairs due to lower liquidity.
|Crosses||Currency pair||Full name||Rate||Calculation|
|Euro Crosses||EURCHF||Euro vs Swiss Franc||1.1747||1 EUR = 1.1747 CHF|
|EURGBP||Euro vs Pound||0.8823||1 EUR = 0.8823 GBP|
|EURCAD||Euro vs Canadian Dollar||1.4878||1 EUR = 1.4878 CAD|
|EURAUD||Euro vs Australian Dollar||1.5271||1 EUR = 1.5271 AUD|
|EURNZD||Euro vs New Zealand Dollar||1.6674||1 EUR = 1.6674 NZD|
|Pound Crosses||GBPCHF||Pound vs Swiss Franc||1.3314||1 GBP = 1.3314 CHF|
|GBPAUD||Pound vs Australian Dollar||1.7308||1 GBP = 1.7308 AUD|
|GBPJPY||Pound vs Japanese Yen||151.91||1 GBP = 151.91 JPY|
|GBPCAD||Pound vs Canadian Dollar||1.6862||1 GBP = 1.6862 CAD|
|GBPNZD||Pound vs New Zealand Dollar||1.8897||1 GBP = 1.8897 NZD|
|Yen Crosses||CHFJPY||Swiss Franc vs Japanese Yen||114.10||1 CHF = 114.10 JPY|
|CADJPY||Canadian Dollar vs Japanese Yen||90.09||1 CAD = 90.09 JPY|
|AUDJPY||Australian Dollar vs Japanese Yen||87.77||1 AUD = 87.77 JPY|
|NZDJPY||New Zealand Dollar vs Japanese Yen||80.39||1 NZD = 80.39 JPY|
|Other Crosses||AUDCAD||Australian Dollar vs Canadian Dollar||0.9742||1 AUD = 0.9742 CAD|
|CADCHF||Canadian Dollar vs Swiss Franc||0.7895||1 CAD = 0.7895 CHF|
|AUDCHF||Australian Dollar vs Swiss Franc||0.7692||1 AUD = 0.7692 CHF|
|AUDNZD||Australian Dollar vs New Zealand Dollar||1.0918||1 AUD = 1.0918 NZD|
|NZDCHF||New Zealand Dollar vs Swiss Franc||0.7045||1 NZD = 0.7045 CHF|
|NZDCAD||New Zealand Dollar vs Canadian Dollar||0.8937||1 NZD = 0.8937 CAD|
Exotic currency pairs:
Exotic currency pairs are made with major currencies from emerging country’s currencies. Mostly the developed countries other than the popular one. These currency pairs have the lowest number of transactions among traders. Thus it has the highest spread due to lack of liquidity.
|Exotic currency pair||Full name||Rate||Calculation|
|USDSEK||US Dollar vs Swedish Krona||8.22||1 USD = 8.22 SEK|
|USDNOK||US Dollar vs Norwegian Krone||8.10||1 USD = 8.10 NOK|
|USDTRY||US Dollar vs Turkish Lira||3.76||1 USD = 3.76 TRY|
|USDDKK||US Dollar vs Danish Krone||6.23||1 USD = 6.23 DKK|
|USDZAR||US Dollar vs South African Rand||12.34||1 USD = 12.34 ZAR|
|USDHKD||US Dollar vs Hong Kong Dollar||7.82||1 USD = 7.82 HKD|
|USDSGD||US Dollar vs Singapore Dollar||1.3354||1 USD = 1.3354 SGD|
|USDTHB||US Dollar vs Thailand Baht||32.20||1 USD = 32.20 THB|
|USDMXN||US Dollar vs Mexican Peso||19.22||1 USD = 19.22 MXN|
Currency pair basket:
With 8 major currencies, there can be 28 currency pairs combination possible including major pairs & cross minor pairs which get traded mostly among forex traders. These 28 currency pairs combinations also get widely traded in basket trading strategies with currency correlation & hedging. (explained in chapter 12)
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