Currency Pairs

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DEFINITION of 'Currency Pairs'

Two currencies with exchange rates that are traded in the retail forex market. The rates of exchange between foreign currency pairs are calculated as the factor by which a base currency is multiplied to yield an equivalent value or purchasing power of foreign currency. The currency exchange rates of foreign currency pairs float, meaning that they change continually based on a multitude of factors.

BREAKING DOWN 'Currency Pairs'

For example, the currency pair EUR/USD, or "eurodollar," represents the number of U.S. dollars that can be bought with one euro. As the value of the EUR increases, the currency pair exchange rate will also increase.

By going long the EUR/USD foreign currency pair, the currency trader is speculating that the value of the euro will increase in relation to the U.S. dollar. Alternatively, when a forex trader shorts the EUR/USD currency pair, he or she is speculating that the value of the U.S. dollar will increase in relation to the euro.

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    The foreign exchange market, also called the currency market or forex (FX), is the world's largest financial market, accounting ... Read Answer >>
  2. How are international exchange rates set?

    International currency exchange rates display how much one unit of a currency can be exchanged for another currency. Currency ... Read Answer >>
  3. 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 ... Read Answer >>
  4. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  5. What is the value of one pip and why are they different between currency pairs?

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  6. Why isn't the EUR/USD currency pair quoted as USD/EUR?

    In a currency pair, the first currency in the pair is called the base currency and the second is called the quote currency. ... Read Answer >>
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