A currency pair is the quotation of two separate currencies and is used as a financial instrument to buy or sell the currencies in exchange for the other. A currency pair is always presented with a base currency on the left and a quote currency on the right.
Currency Pair Categories
Depending on its part in active trading and at times, the countries the currency originates from, currency pairs can come in various categories.
- Major Currency Pairs: Primarily, these pairs are those that involve the U.S. Dollar. These pairs are much more popular with highly traded volumes as they are considered as ‘safe haven’ assets.
- Minor or Cross Currency Pairs: Primarily, these pairs are those that do not involve the U.S. Dollar. These are usually local-based and are not as popular as major currency pairs.
Exotic Currency Pairs: The more rarer pairs of the two that often have lower trading volumes and have currencies from countries with crucial or interesting global indicators and/or market events.