What Are Currency Pairs?
Forex markets refer to the trading of currencies in pairs, with names combining two different currencies that are traded against each other, or exchanged for each other. In addition, the forex markets have given most currency pairs nicknames or acronyms, which refer to the pair and not necessarily the individual currencies involved.
The bulk of spot currency trading, about 75 percent by volume, takes place in the so-called majors. Trading in major currencies is largely free from government regulations and is outside the authority of any national or international body.
Trading in the currencies of smaller, less developed economies, such as Thailand or Chile, is often referred to as emerging markets or forex trading, and may involve currencies with local restrictions on convertibility or limited liquidity, both of which limit access and prevent the development of an active market.
Major currency pairs
All major currency pairs include the US dollar on one side of the transaction. The designations of the major currencies are expressed using the International Standardization Organization (ISO) symbols for each currency.
The following table lists the most traded currency pairs, what they are called in traditional terms, and the nicknames the market has given them.
The Major U.S. Dollar Currency Pairs
ISO Currency Pair Countries Long Name Nickname
EUR/USD Eurozone*/United States Euro-dollar N/A
USD/JPY United States/Japan Dollar-yen N/A
GBP/USD United Kingdom/United States Sterling-dollar Sterling or Cable
USD/CHF United States/Switzerland Dollar-Swiss Swissy
USD/CAD United States/Canada Dollar-Canada Loonie
AUD/USD Australia/United States Australian-dollar Aussie or Oz
NZD/USD New Zealand/United States New Zealand-dollar Kiwi
The Eurozone consists of all the European Union countries that have adopted the euro as their currency. Currently, the Eurozone countries are Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia and Spain.
Currency names and nicknames can be confusing when you follow the forex market or read reviews and research. Make sure you understand whether the writer or analyst is referring to the individual currency or currency pair.
>>> If a bank or brokerage does research indicating that the Swiss franc will weaken in the future, the comment refers to the single currency, in this case the Swiss franc, indicating that the USD/CHF will rise (USD is stronger/ Swiss franc (weaker).
>>> If the comment indicates that the Swiss Franc is likely to weaken in the future, this indicates the currency pair and lives up to expectations that the USD/CHF will move lower (the USD is weaker/ the Swiss Franc is stronger).
Currency Pairs Cross
A cross currency pair (cross or cross for short) is any currency pair that does not include the US dollar. The cross rates are derived from the respective US dollar pairs but are priced independently and usually with a tighter spread than you can get by trading the dollar pairs directly. (The spread refers to the difference between the bid and ask, or the price at which you can buy and sell. Spreads apply in most financial markets.)
The currency pairs most actively traded focus on the three major currencies other than the US dollar (Euro, Japanese Yen and Sterling) and are referred to as EUR/JPY pairs, cross pairs, and GBP. The remaining currencies (Swiss Franc, Australian Dollar, Canadian Dollar and New Zealand Dollar) are also traded in cross pairs.