Many currencies are used officially all around the world. But only a few of them are used for trade. This is because the world of trade allows only those currencies to participate that are economically and politically stable. It is very obvious that how can the currency of a declining economy compete with US Dollar that is the most actively traded currency.
You must have heard about the currency pairs in trade. Currencies are traded in the form of pairs. A currency pair has two national currencies of two different countries coupled for trade in the foreign exchange market. These pairs work on exchange rates, where the market value of one currency is brought in comparison with the value of the other currency in the pair. The two currencies in the pair are categorized as the base and the quote currency.
When the prices of the base currency and the quote currency are compared against each other, it tells how much the quote currency do you need to buy a single unit of the base currency. In the international market, these currencies are not identified by their names. A three-letter currency code called ISO Currency Code is used to identify them on the international level.
What are the Major Currency Pairs Traded Around the World?
By major currency pairs, I mean the pairs that are traded most actively because of their high demand in the forex market. If you are planning to invest in forex trading and want to participate as interactive investor, it is crucial to understand the major pairs because without knowing them, you cannot enjoy success in this trade. Hence, in this article, I will discuss the six most actively traded pairs in the forex exchange market.
Let me tell you one important thing here. You will notice that almost all of the pairs hold USD because the United States is currently one of the world’s strongest economies. Now, let’s jump into knowing further about these major pairs.
– The Euro and US dollar – EUR/USD
most popularly traded pair in the Foreign Exchange market is none other than
the Euro and US Dollar pair. It holds the two most powerful currencies of the
world: the national currency of The United States and the national currency of
most European countries. As the Euro is the base currency in this pair, it
indicates the relative value of the Euro against the US Dollar. It means this
price comparison gives the number of US Dollars (the quote currency) required
to buy one unit of European currency (Euro) that is the base currency.
– The US dollar and Japanese yen – USD/JPY
mentioned earlier, most of the pairs hold US dollars. The same is the case with
this pair. The other currency is of another powerful economy that is Japan.
Here US Dollar is the base currency. Hence, the pair indicates its relative
value against the Japanese Yen. The mentioned prices tell how much of the quote
currency that is Japanese Yen are required to buy one US Dollar.
3 – The British pound sterling and US dollar – GBP/USD
As you can see, this pair also holds
the currencies of very strong economies: the United Kingdom and the United
States. GBP or the British Pound Sterling is the base currency, while the quote
currency is the US Dollar. Hence, this pair tells the amount of US Dollars
required to buy one GBP.
4 – The US dollar and
Swiss franc –
Helvetica Franc, abbreviated as CHF, is also called Swissie. It is the official
currency of Switzerland. The pair holds US Dollar as the base currency while
CHF as the quote currency, and the pair reveals how much of the Swiss Francs do
you need to buy one US Dollar.
5 – The Australian
Dollar and US dollar – AUD/USD
This forex pair has an Australian
Dollar, also called Aussie, as the base currency against the US Dollar as the
quote currency. This price comparison reflects the amount of US Dollars you
will need to buy one Aussie.
6 – The US dollar and
Canadian Dollar –USD/CAD
The two currencies in this pair are
called the cousin currencies, as they are the official currencies of two cousin
countries, the United States and Canada. Here, the Canadian Dollar holds the
position of the quote currency against the US Dollar. It means the prices
listed in the pair reflect how many CADs are required to buy one unit of US