Understanding currency pairs

FX Strategy Articles > FX-guides

In a FX transaction, one currency is bought and another sold at the same time, and these two currencies are called a "pair" of currencies or "Cross".

If a currency pair is for example quoted as the EUR/USD, then the Euro in this case is regarded as the base currency and the USD as the quote currency. The currencies could of course be quoted in reverse as USD/EUR in which case the USD is the base currency and the EURO is the quoted.

It has become practice amongst professionals to categorize Currency pairs into the major European Crosses (EUR, GPB and CHF), the commodity currency pairs CAD/USD, AUD/USD and NZD/USD and the main Yen Crosses with the USD, Euro and GBP.

Currency pairs are also divided into’ majors’ and ‘minors’. The USD, EUR, JPY, GBP, AUD, CAD and CHF are the largest share of the foreign exchange market because they are the most traded in the world and therefore provide high liquidity.

The remaining currency pairs are called Minors because they are not as frequently traded. For example, such currencies include the NZD (New Zeland Dollar) and nclude the NZD (the New Zealand dollar) and the ZAR (the South African rand).

Below is the estimated percentage that each currency

1.) United States dollar USD ($) 84.9%

2.) EURO (€) 39.1%

3.) Japanese yen JPY (¥) 19.0%

4.) Pound Sterling GBP (£) 12.9%

5.) Australian dollar AUD ($) 7.6%

6.) Swiss franc CHF (Fr) 6.4%

7.) Canadian Dollar CAD ($) 5.3%

8.) Hong Kong Dollar HKD ($) 2.4%           

9.) Swedish krona SEK (Kr) 2.2%

10.) New Zealand dollar NZD ($) 1.6%

Published on 12th of April 2011
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