What are Forex currency pairs?

Posted on 2023-04-16

Forex currency pairs refer to the two currencies that are being traded against each other in the foreign exchange market. In forex trading, one currency is bought while the other is sold simultaneously. The value of a currency pair is determined by the exchange rate between the two currencies.

For example, one of the most commonly traded forex currency pairs is the EUR/USD. This represents the euro against the U.S. dollar. If the exchange rate between the two currencies is 1.1200, this means that it takes 1.12 U.S. dollars to buy 1 euro. If a trader believes that the value of the euro will increase against the dollar, they can buy the EUR/USD pair. If the exchange rate then rises to 1.1300, the trader can sell the pair and make a profit.

Forex currency pairs are often categorized into three groups: major, minor, and exotic. The major currency pairs include the most heavily traded pairs, such as the EUR/USD, USD/JPY, GBP/USD, and USD/CHF. The minor currency pairs are less commonly traded, such as the AUD/NZD and EUR/GBP. The exotic currency pairs include currencies from emerging or less developed countries, such as the USD/ZAR (U.S. dollar vs. South African rand) and the USD/TRY (U.S. dollar vs. Turkish lira).

In forex trading, it's important to understand the characteristics and behavior of different currency pairs, as well as the factors that influence their exchange rates. This knowledge can help traders make more informed trading decisions and better manage their risk.

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