In Forex, a transaction is a simultaneous buy-sell — buying of one currency and selling the other. Thus, they are traded in pairs and quoted in relation to one another. Example pairs might be the U.S. dollar and the Canadian dollar (USD/CAD) or the Euro and the Japanese yen (EUR/JPY).
In a pair, each currency is constantly fluctuating in relation to the other, like two anchors in a game of tug-of-war. The prevailing price of two currencies from two different nations is the exchange rate. Depending on which currency is stronger now, exchange rates are always changing.
Traders categorize currency pairs into three buckets:
- Majors
- Crosses
- Exotics
The U.S. dollar is always included in all major currency pairs because of the prominent role that the United States has in the world economy. The US dollar is not included in cross-currency pairs. But there is a subcategory known as minors, which are crosses that involve any of the major currencies.
If a pair contains one major currency and one currency from an emerging market, it is known as an exotic.
Major Currency Pairs
We’ve listed all the majors below in a handy table. As mentioned, they all contain the US dollar and consequently are the most frequently traded. Because of the prominence of the major currencies in the world economy, price action moves with more frequency within the major pairs. Obviously, that means more opportunities to trade.
Have you ever heard of the term liquidity? The term describes the level of activity in the financial market, and the majors, as you would expect, are the most liquid in the world. There is a correlation between liquidity to volume. In other words, if there are lots of active traders buying and selling a certain pair, the liquidity of that pair is higher. For example, the EUR/USD currency pair is traded with greater volume than the NZD/USD currency pair. Thus, the EUR/USD is more liquid than the NZD/USD.
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| EUR/USD | Eurozone / United States | euro dollar |
| USD/JPY | United States / Japan | dollar yen |
| GBP/USD | Great Britain / United States | pound dollar |
| USD/CHF | United States / Switzerland | dollar swissy |
| USD/CAD | United States / Canada | dollar loonie |
| AUD/USD | Australia / United States | aussie dollar |
| NZD/USD | New Zealand / United States | kiwi dollar |
Major Cross-Currency Pairs (AKA Minor Currency Pairs)
If a pair does not contain the US dollar, it is called a cross-currency pair or a cross. Minors are also known as major crosses. While the volume of trades within the cross-currency pairs is less than the majors, the crosses still provide plenty of trading opportunities and liquidity.
Crosses that are most actively traded usually contain the three major non-U.S. dollar currencies: Euro, the Japanese yen, and Great Britain pound.
We’ve put together some handy tables below of crosses.
Euro crosses
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| EUR/CHF | Eurozone / Switzerland | euro swissy |
| EUR/GBP | Eurozone / Great Britain | euro pound |
| EUR/CAD | Eurozone / Canada | euro loonie |
| EUR/AUS | Eurozone / Australia | euro aussie |
| EUR/NZD | Eurozone / New Zealand | euro kiwi |
| EUR/SEK | Eurozone / Sweden | euro stockie |
| EUR/NOK | Eurozone / Norway | euro nockie |
Yen crosses
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| EUR/JPY | Eurozone / Japan | euro yen OR yuppy |
| GBP/JPY | Great Britain / Japan | pound yen OR guppy |
| CHF/JPY | Switzerland / Japan | swissy yen |
| CAD/JPY | Canada / Japan | loonie yen |
| AUD/JPY | Australia / Japan | aussie yen |
| NZD/JPY | New Zealand / Japan | kiwi yen |
Pound crosses
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| GBP/CHF | Great Britain / Switzerland | pound swissy |
| GBP/CAD | Great Britain / Canada | pound loonie |
| GBP/AUS | Great Britain / Australia | pound aussie |
| GBP/NZD | Great Britain / New Zealand | pound kiwi |
Other crosses
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| NZD/CAD | New Zealand / Canada | kiwi loonie |
| CAD/CHF | Canada / Switzerland | loonie swissy |
| AUD/CAD | Australia / Canada | aussie loonie |
| AUD/CHF | Australia / Switzerland | aussie swissy |
| AUD/NZD | Australia / New Zealand | aussie kiwi |
| NZD/CHF | New Zealand / Switzerland | kiwi swissy |
Exotic Currency Pairs
When one major currency is paired with the currency of a non-major, traders refer to these pairs as exotic currency pairs. Such emerging economies might include Brazil, Mexico, Peru, Greece, or Poland, as an example.
There are quite a few exotics but, depending on your forex broker, you may only see certain exotic pairs offered. Most traders stick to pairs that contain major currencies, so exotic pairs don’t have the same volume and are therefore less liquid. What you will find is that the spread or transaction costs associated with trading exotic pairs are usually wider. In fact, it’s not uncommon to see spreads on exotic pairs that are two, three, or even four times bigger than the EUR/USD or USD/JPY, for example.
We have put together a chart with a few examples of exotics.
A word of caution: since the liquidity is generally lower with exotics, they tend to be far more responsive to economic and geopolitical events. As an example, if Chile experiences a political scandal or unanticipated economic turn, it can cause an exotic pair that contains Chile’s currency to swing unexpectedly and forcefully.
Naturally, traders like numbers and groups and orderly information. And so, there are other common groups of currencies from the world of FX.
| CURRENCY PAIR | COUNTRIES | NICKNAME |
|---|---|---|
| USD/BRL | United States / Brazil | dollar real |
| USD/CLP | United States / Chile | |
| USD/HKD | United States / Hong Kong | |
| USD/MXN | United States / Mexico | dollar mex |
| USD/PLN | United States / Poland | dollar zloty |
| USD/RUB | United States / Russia | dollar ruble OR Barney |
| USD/SAR | United States / Saudi Arabia | dollar riyal |
| USD/SGD | United States / Singapore | dollar sing |
| USD/THB | United States / Thailand | dollar baht |
| USD/ZAR | United States / South Africa | dollar rand |
G10 Currencies
The group of 10 or G10 is a group of 11 industrialized nations that have similar economic interests. The currencies of the G10 nations also happen to be the world’s most liquid currencies, due to both economic stability and trading volume.
| COUNTRY | CURRENCY NAME | CURRENCY CODE |
|---|---|---|
| Australia | dollar | AUD |
| Canada | dollar | CAD |
| Denmark | krone | DKK |
| European Union | euro | EUR |
| Japan | yen | JPY |
| New Zealand | dollar | NZD |
| Norway | krone | NOK |
| Sweden | krona | SEK |
The Scandies
If you are a fan of basic world geography, then you should know where Scandinavia is. It is the region in northern Europe that contains Denmark, Norway, Finland, and Sweden. In terms of FX trading, the Scandies refer to the currencies of Denmark, Norway, and Sweden, specifically.
Interestingly enough, Denmark, Sweden, and Norway at one point in history had merged their currencies to a gold standard called the Scandinavian monetary union. After World War One, the gold standard was abandoned, and the Scandinavian monetary union was no more.
| COUNTRY | CURRENCY NAME | CURRENCY CODE |
|---|---|---|
| Denmark | krone | DKK |
| Norway | krone | NOK |
| Sweden | krona | SEK |
Central and Eastern European Currencies
CEE is the common acronym for Central and Eastern Europe. CEE includes the nations of Central Europe, the Baltics, Eastern Europe, and Southeast Europe (also known as the Balkans). Nations that are part of the CEE include Albania, Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, the Slovak Republic, Slovenia, Estonia, Latvia, and Lithuania.
However, in terms of the FX market, there are only four main CEE currencies of note.
| COUNTRY | CURRENCY NAME | CURRENCY CODE |
|---|---|---|
| Czech Republic | koruna | CZK |
| Hungary | forint | HUF |
| Poland | zloty | PLN |
| Romania | leu | RON |
BRIICS
BRIICS is a term that refers to the six major emerging national economies — which include Brazil, Russia, India, Indonesia, China, and South Africa.
| COUNTRY | CURRENCY NAME | CURRENCY CODE |
|---|---|---|
| Brazil | real | BRL |
| China | yuan | CNY |
| India | rupee | INR |
| Indonesia | rupiah | IDR |
| Russia | ruble | RUB |
| South Africa | rand | ZAR |
Disclaimer: All information provided here is intended solely for study purposes related to trading financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis, or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of SurgeTrader and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity and it is advised not to risk more than one can afford to lose.
