What is the meaning of currency pairs in foreign exchange transactions?
A currency pair is a foreign exchange exchange rate consisting of two currencies.
The mainstream currency pairs in the foreign exchange trading market are those based on the US dollar. For example, the mainstream currency pairs in the Doo Prime Depu currency exchange platform include euro /US dollar (EUR/USD), pound /US dollar (GBP/USD), Australian dollar /US dollar (AUD/USD) and so on.
There are also currency pairs that are not pegged to the US dollar, such as EUR/GBP, AUD/JPY, AUD/CAD, etc.
As we all know, the main currency pair for foreign exchange is the dollar currency pair.
The US dollar is currently the main currency in circulation in the world, accounting for more than 80% of global foreign exchange trading volume.
What is the meaning of the dollar currency pair among foreign exchange major currency pairs?
The currency pair is mainly determined by the strong economic strength of the United States, which is the main body of the world at present and has the core position of a wide range of global trade.
However, with the rise of China, it is believed that RMB will gradually occupy or even replace the US dollar in the future.
In the world, the US dollar is a very special currency, because the vast majority of transactions in the foreign exchange market involve the US dollar.
As the world’s reserve currency, most agricultural and industrial commodities and the vast majority of international debt are denominated in dollars.
In addition, almost every country’s currency is quoted in relation to the United States dollar as the base rate, and other rates are calculated by conversion.
The fundamental reason for these conditions is the dominant position of the American economy in the world.
The United States has a strong economic power and a core position in global trade, so the market divides currency pairs into straight and cross trades according to whether the dollar is involved or not.
Please refer to the previous foreign exchange currency pair for the meaning of cross.
As for the Euro-American currency pair, it is the euro/dollar currency pair EUR/USD for short.
EUR/USD accounts for about 20 percent of daily trading volume in the foreign exchange market, ranking first, according to the latest annual data from the Bank of International Settlements.
But that ratio is lower than it was a few years ago, suggesting that the market’s enthusiasm for U.S. and European currency pairs is waning.
Due to the huge trading volume of European and American currency pairs and the large amount of money traded, the spread was also very low, often between 0 and 2 points.
The average intraday range for EUR/USD is around 100 points (pip).
As we all know, each currency has a price for exchange, which is the exchange rate.
Shorting, then, is when some investor bets against a currency in the currency market, believing that its price will fall against other major international currencies.
In other words, the country’s currency will become less valuable in the international market, and then make investments based on the judgment of the plus or minus.
What do you mean by a currency pair? A currency pair is essentially an exchange of money with money.
Take the euro and the dollar as an example. The exchange rate of the euro has declined, and the wealth of holders of the euro has decreased while that of holders of the dollar has increased while the total amount of the euro and the dollar in the world has not changed.
Their rising share is divided equally between those whose euro wealth has fallen, and all euro holders suffer the loss.
What does not belong to the primary and secondary currency pairs is the rare currency pair (please refer to the previous foreign exchange currency pair for the meaning of the primary and secondary currency pairs).
That said, don’t assume that rare currencies are cheap.
The Kuwaiti dinar and Saudi Arabian riyal are both high-value currencies, but they are still classified as rare.
That’s more about what a currency pair means in this article.
Investors should bear in mind that all transactions involve a certain amount of risk, so be sure to consider many aspects to avoid risk.
