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 can I invest in a foreign exchange market?

    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ...
  2. What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world ...
  3. What do the terms weak dollar and strong dollar mean?

    The two terms, weak dollar and strong dollar, are generalizations used in the foreign exchange market to describe the relative ...
  4. How do you make money trading money?

    Investors can trade almost any currency in the world. Investors, as individuals, countries, and corporations, may trade in ...
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 ...
comments powered by Disqus
Related Articles
  1. Understanding The Spread in Retail Currency ...
    Forex Education

    Understanding The Spread in Retail Currency ...

  2. What Would Have To Happen For The Iraqi ...
    Forex Fundamentals

    What Would Have To Happen For The Iraqi ...

  3. Is the Iraqi Dinar Investment a Wise ...
    Forex Fundamentals

    Is the Iraqi Dinar Investment a Wise ...

  4. Seven Emerging Currencies Challenging ...
    Forex Fundamentals

    Seven Emerging Currencies Challenging ...

  5. The Best Day-Trading Schools
    Trading Strategies

    The Best Day-Trading Schools

Trading Center