What is the Paris Pair
BREAKING DOWN Paris Pair
The Paris Pair described foreign currency trades involving the U.S. dollar and the French franc prior to France’s adoption of the euro in 2002.
Investors trading on foreign currency exchanges seek to make money on changes in exchange rates between different currencies. They execute trades in pairs, taking a long position in one and a short position in the other. The trader expects the price of the currency in the long position to rise and the price of the currency in the short position to fall. The change in the ratio between the prices of the two currencies indicates whether or not a trader makes money.
A foreign exchange investor trading the Paris Pair would have taken a position based upon the relationship between the U.S. dollar and the French franc. If the trader believed the franc would strengthen in comparison to the dollar, then they would short the dollar and go long on francs. If the trader thought the franc would weaken compared to the dollar, they would have taken the opposite position, shorting francs and going long dollars.
Since the French franc gave way to the euro, a foreign exchange trader interested in the Paris Pair today would have to settle for the EUR/USD currency pair instead.
Popular U.S. Dollar Pairings
The U.S. dollar trades on one side or another of all major currency pairs in foreign exchange markets. Pairing the euro with the dollar, abbreviated EUR/USD on exchanges, forms one of the four most popular foreign exchange trades. The other three pair the dollar with the Japanese yen or USD/JPY, the British pound or GBP/USD, and the Swiss franc or USD/CHF.
The French Franc
The Bank of France, established in 1800 by Napoleon, issued and managed the French franc prior to the change to the euro. The currency itself dates back to 1360, when it first appeared as a gold coin. The Latin Monetary Union, established in 1865, used a version of the French franc until it dissolved in 1927. In 1992, French voters agreed to adopt the Maastricht Treaty, which helped establish the European monetary union and put the country on a path to adopting the euro administratively in 1999, and phasing the franc out of circulation by 2002. The Bank of France continued to exchange franc coins for euros through 2005 and accepted banknotes for exchange until 2012.