FOREX CURRENCIES TRADED IN FOREX AND HOW THEY ARE GROUPED

                                                                                                                                                              LESSON TWO

As you have learned from the previous lesson, Forex trading is the buying of one currency and selling another simultaneously. A Forex currency definitely has an exchange rate against another currency. The exchange rate is not fixed because it is a reflection of the economy of the country where the currency is the main money used. For example, The US Dollar is the United States main currency and any political or economic change will affect the exchange rate of the USD against other currencies.

 

Major Forex Currencies

There are 180 currencies in the world, but only a few are regarded as Major currencies. They are called ‘Majors’ because they are the most traded currencies in the world. As a beginner, you are required to learn more about the Major Currencies and how they are paired against each other. They are:

 

USD   (United State Dollar)

EUR   (European Currency)

JPY     (Japanese Yen)

GBP    (British Pound)

CHF    (Switzerland Franc)

CAD   (Canadian Dollar)

AUD   (Australian Dollar)

NZD    (New Zealand Dollar)

 

As you can see, three letters are usually used to identify these currencies. While the first two letters represents the country, the last letter represents the currency. It might also interest you to know that each currency has nicknames and this you will learn as you advance further on this Forex course. It is logical that if different currencies are traded against each other, they have to be paired. Let us see how they are paired.

 

Major Currency Pairs

The major currency pairs also known as the MAJORS are currency pairs that constitutes the largest share in the Foreign exchange market and they have the highest market liquidity. They are:

 

EUR/USD

USD/JPY

GBP/USD

USD/CAD

USD/CHF

NZD/USD

AUD/USD

 

Cross currency Pairs

You might be wondering if the Major pairs are the only paired currencies to trade. This is where the Cross Pairs come in. Cross Pairs are currency pairs that do not include the USD. The Cross Pairs can further be grouped into Major Crosses and Minor Crosses. The major crosses include the most actively traded currency pairs excluding the USD, while the minor crosses includes the less traded Forex currencies. They are:

 

Major Crosses

EUR/CHF

EUR/JPY

GBP/JPY

EUR/GBP

 

Minor Crosses

GBP/AUD

GBP/CAD

GBP/CHF

GBP/NZD

EUR/AUD

EUR/NZD

AUD/CHF

AUD/JPY

CAD/JPY

CAD/CHF

NZD/CHF

NZD/JPY

CHF/JPY

Finally, you must understand that the 180 currencies in the world include currencies of emerging countries or economy, such as Turkey, Hong Kong, Mexico and so on. Can these currencies be traded? Yes!

When the currency of an emerging economy is paired with a major currency, it is called an Exotic Currency pair. Examples are:

 

Exotic Currency Pairs

USD/SEK      (US Dollar/Swedish Krona)

USD/DKK      (US Dollar/Danish Krone)

USD/NOK      (US Dollar/Norwegian Krone)

USD/SGD      (US Dollar/Singapore Dollar)

USD/HKD      (US Dollar/Hong Kong Dollar)

USD/ZAR      (US Dollar/South African Rand)

EUR/TRY      (Euro/Turkish Lira)

Now that you understand how Forex Currencies are grouped, you are ready to learn currency pair quotations. Go to the Next Lesson

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