On the foreign exchange market, national currencies from two different countries are matched against each other and used for trading. The value of one currency (the base) is quoted against the other (the quote). This phenomenon is known as Currency Pairs. All transactions within the Forex market, whether buying, selling, or trading is done through currency pairs. The exchange rate of currency pairs is said to be floating, which implies that it changes from time to time. This change is brought about by several factors, including change in the respective value of the currencies. In all cases of currency pairs, one currency holds stronger than the other.
Almost all currencies from various nations can be used to trade, but there are those currencies that pair more frequently than others.
- USD/JPY – this pair sets the US dollar against the Japanese Yen
- USD/GBP – commonly known as pound-dollar, this pair sets the US dollar against the United Kingdom pound.
- AUD/USD – in this case, the US dollar is set against the Australian dollar, and the pair is commonly known as the Aussie dollar
- USD/CHF – the US dollar is set against the Switzerland money and this set is known as the dollar Swissy
- USD/CAD – the US dollar is set against the Canadian dollar, and the pair is known as the dollar-loonie
- NZD/USD – here, New Zealand’s currency is set against the US dollar. This is known as the kiwi dollar
These are the currencies that are not used frequently. They are not paired with the US dollar, but they consist of the UK pound, the Euro, and the Yen. They have a smaller market share as compared to the currencies paired with the US dollar. This makes these minor currencies exhibit lower market liquidity.