What is a currency pair?
It is important to understand that currency pairs come in pairs, a pair of two currencies called a currency pair.
Currency pairs are represented by two ISO codes with a delimiter, such as GBP/USD, where the first code stands for “base currency” and the other for “secondary currency.”
What are the common currency pair transactions?
The currencies most frequently used in financial derivatives transactions are US dollar, Euro, Japanese yen, British pound, Australian dollar, Canadian dollar, Swiss Franc and New Zealand dollar. The following lists 15 common currency pairs according to the volume of currency pairs.
EUR/USD Euro /US Dollar currency EUR/GBP Euro/British Pound currency EUR/CHF Euro/Swiss Franc currency EUR/NZD Euro/New Zealand Dollar currency USD/CHF dollar/Swiss Franc currency USD/GBP dollar/British Pound currency USD/JPY dollar/Japanese Yen currency USD/CAD dollar/Canadian dollar currency pair
EUR/JPY Euro/Yen currency pair EUR/AUD Euro /AUD AUD currency pair EUR/CAD Euro/Canadian dollar currency pair NZD/JP NZD/ yen currency pair AUD/USD AUD/USD AUD/JPY AUD/JPY AUD/NZD AUD/NZD currency pair The common currency pairs listed above also include main
For currency pairs and some popular currency pair transactions, please refer to the previous issue of “How to choose Currency pair transactions”. The chapter of popular and major currency pairs mentioned here will not be repeated.
The chart below shows the ranking of the top 10 currency pairs by trading volume in 2020. You can see that the number one spot remains the euro versus the dollar.
This is not hard to understand, since the USD/DEM was an active currency pair long before the euro was born.
At that time, the Deutsche Mark was the second largest reserve currency in the world, so the trading volume was also quite large. The currency pair with large trading volume must be the currency with high liquidity. The currency with high liquidity means the demand is large, so it is easy to buy and sell in the market.
With the Deutschmark out of the market, the euro/dollar (ERU/USD) has undoubtedly become a highly traded currency pair.
Higher liquidity also means lower transaction fees.
So investors can get a better deal.
Therefore, EUR/USD currency pair naturally has the best trading conditions: (see figure EUR/USD currency pair trading ratio: 27.95%) ¢Ù the lowest spread;
(2) when the position is rolled over to the next trading day (swap), the rate is low;
Open position zero rate or very low rate;
¢Ü Faster order execution.
Currency pairs with low trading activity We have discussed the most actively traded foreign exchange currency pairs. What are the low active currency pairs?
Each ranking has a first and last place, but the ranking of currency pair activity (volume ranking) is not so simple.
So far, there are 180 different currencies around the world.
So the total number of possible currency pairs is 16,110.
Assume that the currency pair SZL/VUV (Eswatini Rangini/Vanuatuwatu) is the least actively traded currency pair in the world.
Using this criterion, a list of such currency pairs can be listed.
But it is still impossible to say exactly which FX pair is the least active.
If the list is limited to the currency pairs that can be traded in the foreign exchange market, the list of the least active currency pairs is as follows: ¢Ù Among the major currency pairs — NZD/USD;
¢Ú Secondary currency pair — NZD/CHF;
¢Û Rare currency pair — GBP/HUF;
The more popular the currency pair, the better the terms of trade.
Therefore, for foreign exchange novices, it is recommended to start with a currency pair with high trading volume (high activity).
Tip: When choosing a currency pair to trade, consider changes in its activity over the course of the day.
In particular, note that some currency pairs can only trade during certain times of the day.
In addition, the trading volume of a currency pair is not a stable value.
