What are the most common currency pairs traded in the forex market?

By Albert Phung AAA
A:

There are many official currencies that are used all over the world, but there only a handful of currencies that are traded actively in the forex market. In currency trading, only the most economically/politically stable and liquid currencies are demanded in sufficient quantities. For example, due to the size and strength of the United States economy, the American dollar is the world's most actively traded currency.

In general, the eight most traded currencies (in no specific order) are the U.S. dollar (USD), the Canadian dollar (CAD), the euro (EUR), the British pound (GBP), the Swiss franc (CHF), the New Zealand dollar (NZD), the Australian dollar (AUD) and the Japanese yen (JPY).

Currencies must be traded in pairs. Mathematically, there are 27 different currency pairs that can be derived from those eight currencies alone. However, there are about 18 currency pairs that are conventionally quoted by forex market makers as a result of their overall liquidity. These pairs are:

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

The total amount of currency trading involving these 18 pairs represents the majority of the trading volume in the FX market. This manageable number of choices makes trading a lot less complicated compared to dealing with equities, which has thousands of possible choices to choose from.

To learn more about forex, see The Forex Market, The Fundamentals Of Forex Fundamentals andA Primer On The Forex Market.

RELATED FAQS

  1. How does inflation affect the exchange rate between two nations?

    Understand how inflation can affect foreign exchange rates of a currency and how it is just one of many economic factors ...
  2. How do I use software to make arbitrage trades?

    Understand the meaning of arbitrage trading, and learn how traders employ software programs to detect arbitrage trade opportunities.
  3. What's the difference between bid-ask spread and bid-ask bounce?

    Understand the difference between the bid-ask spread that determines the buy or sell price for a stock and a bid-ask bounce, ...
  4. How do I find out my bank's bid-ask spread for currency conversions?

    Learn how to find your bank's bid-ask spreads for currency conversions, and understand why you should consider alternative ...
RELATED TERMS
  1. ICE LIBOR

    See LIBOR
  2. WM/Reuters Benchmark Rates

    Spot and forward foreign exchange rates that are used as standard ...
  3. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  4. Open Position Ratio

    The percentage of open positions held for major currency pairs ...
  5. Indirect Quote

    A currency quotation in the foreign exchange markets that expresses ...
  6. Competitive Devaluation

    A series of sudden currency depreciations that nations may resort ...

You May Also Like

Related Articles
  1. Trading Strategies

    Top Day Trading Instruments

  2. Chart Advisor

    Why You Must Watch These Currency ETF ...

  3. Forex Strategies

    Is Now the Right Time to Invest in the ...

  4. Mutual Funds & ETFs

    Bet Against The Euro With EUO ETF

  5. Forex

    The Pros and Cons of a Weak Euro

Trading Center