What you need to know about currencies/Currencies and Currency Pairs

Out of all the currencies and currency pairs sold, some are more important than others. In fact there are 8 major currencies. These are considered to be the most liquid and tradable out there.

They include:

  • USD (United States Dollar)
  • EUR (Euro)
  • JPY (Japanese Yen)
  • GBP (British Pound)
  • CHF (Swiss Franc)
  • CAD (Canadian Dollar)
  • AUD (Australian Dollar)
  • NZD (New Zealand Dollar)

The way the symbol for each currency is decided will become clear if you look at the initials of the corresponding country and currency’s name. Each symbol has three letters. These symbols are important to know because this is how they are denoted in a currency pair.

Other important categories include the G10 currencies and BRIICS.

G10 are basically the top 10 currencies in the world. These include all the ones in the above given list along with Norwegian Krone and Swedish Krona.

BRIICS stands for Brazil, Russia, India, Indonesia, China, and South Africa-all the most important emerging economies.

Just like the currencies themselves, currency pairs too form somewhat of a hierarchy. The main categories are:

  1. Major Currency Pairs or Majors
  2. Minors or Cross Currency Pairs or Crosses
  3. Exotic Pairs

Majors

The ones that are made up of the USD and any other of these major currencies are called major pairs or majors. This is because the US Dollar is the most liquid of all currencies. More than 80% of all currency pairs have USD on one side. This means that it is the one being bought or sold 70% of the time which is what makes it the most liquid.

So the major currency pairs are

  • EUR/USD
  • USD/JPY
  • GBP/USD
  • USD/CHF
  • USD/CAD
  • AUD/USD
  • NZD/USD

Out of the above the first four are the most important.

Minors and Cross Currency Pairs:

Currency pairs that do not contain the USD are called Cross Currency Pairs or just “Crosses”. And the major crosses are called Minors. Look at the list given above of the major currency pairs. Those same currencies, when paired with each other (without USD) make solid pairs too and are called Minors. Some examples of Minor pairs are given below:

  • EUR/GBP
  • EUR/AUD
  • EUR/CHF
  • CHF/JPY
  • GBP/CHF

And so on.

Exotic Pairs:

These consist of one of the major currencies paired with one from a developing economy such as Brazil, South Africa, or Mexico. Examples of these include:

  • USD/HKD- US Dollar with Hong Kong Dollar
  • EUR/TRY- Euro with Turkish Lira
  • GBP/ZAR- British Pound with South African Rand

Now that you know about what we’re playing with, it’s time to see how big exactly is the playing field.

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