Currency Pairs: Majors, Minors and Exotics

In the foreign exchange market, currencies are always traded in pairs. Buying one currency means selling another, so every quote shows the price of one currency in terms of a second. EUR/USD at 1.0850 means one euro costs 1.0850 US dollars. Understanding how pairs are quoted, which pairs are most liquid and what drives each one is the starting point for trading forex. The overview of the market is in What Is Forex?.

Base and quote currency#

• Buying EUR/USD means buying euros and selling dollars. You profit if the euro strengthens against the dollar (the price rises).
• Selling EUR/USD means selling euros and buying dollars. You profit if the euro weakens (the price falls).

Bid, ask and spread#

A forex quote has two prices:

Categories of pairs#

Majors#

The majors pair the US dollar with other leading currencies. They are the most liquid and have the tightest spreads.

"Cable" comes from the transatlantic telegraph cable once used to send pound and dollar prices between London and New York.

Crosses#

Crosses pair two major currencies without the dollar, such as EUR/GBP, EUR/JPY and GBP/JPY. Their prices are derived from the two dollar pairs. Yen crosses such as GBP/JPY are known for large moves.

Exotics#

Exotics pair a major currency with an emerging market currency, such as USD/TRY (Turkish lira), USD/ZAR (South African rand) or USD/MXN (Mexican peso). They have wider spreads, higher volatility, higher interest rate differentials and more political risk. See FX Liquidity.

How much trading happens#

The Bank for International Settlements Triennial Survey reported average daily forex turnover of about $7.5 trillion in April 2022. The US dollar was on one side of about 88% of all trades, and EUR/USD was the most traded pair, followed by USD/JPY and GBP/USD.

Market conventions#

• Which currency is base: set by convention. EUR, GBP, AUD and NZD are usually the base against the dollar; for most others, the dollar is the base (USD/JPY, USD/CAD).
• Decimal places: most pairs quote to four decimals (five with fractional pips); yen pairs quote to two (three with fractional pips).

Calculating a cross rate#

EUR/JPY = EUR/USD × USD/JPY

If EUR/USD is 1.0850 and USD/JPY is 150.00, EUR/JPY ≈ 162.75.

What moves currency pairs#

Common mistakes#

• Confusing which way a pair moves when the dollar strengthens: EUR/USD falls, USD/JPY rises.
• Ignoring wide spreads on exotics.
• Trading many correlated pairs as if they were separate bets. See Currency Correlations.

Frequently asked questions#

What is a currency pair?#

A quote showing the price of one currency in terms of another, such as EUR/USD, where the first is the base and the second is the quote currency.

What are the major currency pairs?#

EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD, all involving the US dollar.

What is a cross currency pair?#

A pair of two major currencies that does not include the US dollar, such as EUR/GBP or EUR/JPY.

Next, learn how forex price moves are measured in Pips and Pipettes.

Sources#

• Bank for International Settlements, Triennial Central Bank Survey