Currency Pairs

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.

Investopedia explains '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.



Related Video for 'Currency Pairs'

comments powered by Disqus
Hot Definitions
  1. Federal Reserve Note

    The most accurate term used to describe the paper currency (dollar bills) circulated in the United States. These Federal Reserve Notes are printed by the U.S. Treasury at the instruction of the Federal Reserve member banks, who also act as the clearinghouse for local banks that need to increase or reduce their supply of cash on hand.
  2. Benchmark Bond

    A bond that provides a standard against which the performance of other bonds can be measured. Government bonds are almost always used as benchmark bonds. Also referred to as "benchmark issue" or "bellwether issue".
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  4. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  5. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  6. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
Trading Center