Forex currency pairs

Main Forex currency pairs

Foreign exchange market investors are: commercial and investment banks, central banks, investment funds, foreign exchange dealers, companies and individual players. Most of the volume is attributed to transactions between commercial and investment banks.

Players on the currency market should be divided into two groups: real currency traders and speculators. The former perform currency exchanges as part of their operations, which require foreign exchange settlements with other institutions, and they also apply foreign exchange hedges to protect them from the unfavourable exchange rate at which future transactions will be settled. Speculators are interested only in earning as much money as possible, using various combinations of investment strategies.

Main currency pairs

Forex currencies are selected in pairs that represent the ratio of the value of one currency (the so-called base currency) to the other (quoted currency) or how much we have to spend the quoted currency to buy the base currency.

Trading platforms offer the possibility to play on multiple currency pairs, but due to the liquidity of trading we can distinguish four basic currency pairs: EUR/USD, USD/JPY, GBP/USD, USD/CHF . They account for the majority of Forex trading (approximately 2/3 of the total volume).

The most liquidity is in the case of EUR/USD. This pair accounts for about 28% of the total Forex trading volume. The high liquidity of this currency pair is connected with the lowest spread, i. e. the difference between the purchase price (BID) and the sale price (ASK).

The second most popular currency pair is USD/JPY. These currencies account for 17% of the daily volume of the Forex market. This pair also has a relatively low spread.

The less liquid the currency pair, the higher the spread value will be.

In order to obtain the rates of the less popular currency pairs, two currency pairs should be crossed with each other. An example is the CHF/PLN pair, whose rate is calculated by dividing the EUR/PLN exchange rate by EUR/CHF.