People who have been in the investment world knows a lot about the currency pairs. One should know about it before directly engaging in this exchange business. None can deny the importance of knowing what is being traded before one trades them.
What is a Currency Pair?
A currency pair in Forex is a more like the quotation for two currencies. A pair defines the amount of a currency to get exchanges with another country’s currency.
For example, EUR/USD is a pair where the Euro gets exchanged with the American USD. The quoted price here is 1.13. It means, to buy 1 Euro, a trader has to pay 1.13 USD.
For any change in one the currency, the other one of the pair also goes through complementary transition.
Major Currency Pairs
The concept of major currency pair may differ depending on traders. But there are four pairs which are treated as major ones regardless of the nations and traders: – EUR/USD, GBP/USD, USD/JPY, and USD/CHF.
“Cross Pairs”, and “Commodity currencies” are also regarded as majors. As major pairs reflect the world’s most influential economies, they get traded in enormous volume. Enormous Volumes lead to shorter spreads. Below are the Forex major pairs:
- EUR/USD
The Euro vs The USD is termed as “Fiber” and is the most exchanged currency pair. The currencies of this pair represent the world’s two largest and impactful economies: the European Union and the US. Get a demo account at Saxo and see how the EURUSD pair offers decent profit taking opportunity.
The pair is highly popular and maintains tight spreads.
- USD/JPY
“The Ninja” is another name for this pair. The Ninja is the second most popular major currency pair. Most carry traders in Singapore borrow the Japanese Yen and exchange them with more productive currencies. The central Bank of Japan has been fighting with low inflation for so many years. Therefore, it has managed to sustain a low interest-rate.
- GBP/USD
GBP is for the Pound Sterling. This pair has got the name “Cable” for using the submarine cables to convey ask and bid rates all across the Atlantic. The pair is almost similar to the EUR/USD pair. The similarities get higher because of the relation between the economy of the United Kingdom and the European Union.
GBP/USD pair has higher liquidity in the market. It makes people enjoy tight spreads.
- USD/CHF
This is the pair between The US dollar and the Swiss Franc. It holds the nickname “Swissy” which attains popularity from the Safe-Haven status of the Swiss Franc.
In the time of extreme volatility and risk, investors bid up the Franc as the Swiss economy remains safe most of the time.
- AUD/USD
It’s the Australian Dollar vs the American Dollar. The nickname of this pair is “Aussie.” It seems to get highly affected by commodity mining, beef farming, wheat and wool-producing.
Aussie tends to follow the Chinese economy. That’s because Australia and China are two massive trading partners.
- USD/CAD
This pair erected the US dollar against the Canadian dollar and termed as “Loonie.’ The pair has a tendency to get affected by the oil business, natural gas and timber.
- NZD/USD
The New Zealand Dollar gets exchanged with the US Dollar. It takes the nickname “Kiwi.’ The Kiwi is significantly impacted by tourism and agricultural data releases. The central bank of New Zealand is also a heavily powerful one. It can make the market volatile just by bringing change in its monetary policy.
These seven are widely regarded as the major currency pairs. To make it simple, experts say that any pair which has USD as one of its currency is a major pair.
Conclusion
Investors must contemplate on the liquidity of a pair before trading it. There are many aspects of a pair that he needs to check before choosing it as his trading instrument. After learning the name of different pairs, he should dig into more advanced topics regarding them.