Definition
Currency PairA currency pair is the quotation of one currency against another, such as EUR/USD, showing how much of the second currency buys one unit of the first.
Example
EUR/USD at 1.0850 means 1 euro buys 1.0850 US dollars. Buying the pair means buying euros and selling dollars at the same time.
In detail
Currencies are always traded relative to one another, because you cannot value a currency in isolation. Each pair has a base currency (first) and a quote currency (second), separated by a slash. Each currency uses its three-letter ISO 4217 code: USD for the US dollar, EUR for the euro, JPY for the Japanese yen, GBP for the British pound, and so on.
Every trade involves two simultaneous actions. Buying GBP/USD means buying pounds and selling dollars. Selling it means selling pounds and buying dollars.
Types of pairs
Pairs are usually grouped by how widely they are traded:
| Group | What it means | Examples |
|---|---|---|
| Majors | USD paired with another heavily traded currency | EUR/USD, USD/JPY, GBP/USD |
| Crosses | Two major currencies without USD | EUR/GBP, AUD/JPY |
| Exotics | A major paired with an emerging-market currency | USD/TRY, EUR/ZAR |
See major currency pairs, cross currency pair and exotic currency pair for more on each.
Why it matters
Understanding the pair structure tells you what you are really betting on. A rise in EUR/USD could reflect euro strength, dollar weakness, or both. Traders often look at other pairs to separate the two. If the euro is rising against the dollar, the pound and the yen at the same time, the move is more likely to be euro-driven.
The pair also determines practical details: pip size (0.01 for JPY-quoted pairs, 0.0001 for most others), typical spread and how liquid the market is.
Example
Assume USD/CHF is quoted at 0.8800 (illustrative). If it rises to 0.8900, one dollar now buys more francs. The dollar has strengthened against the franc by 100 pips. A trader who bought the pair would gain; a trader who sold it would lose.
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Related terms
- Base CurrencyThe base currency is the first currency in a forex pair. The quote shows how much of the second currency is needed to buy one unit of it.
- Quote CurrencyThe quote currency is the second currency in a forex pair. Prices, pip values and profit or loss on that pair are all expressed in it.
- Major Currency PairsMajor currency pairs are the most heavily traded pairs, each combining the US dollar with another leading currency such as the euro, yen or pound.
- Cross Currency PairA cross currency pair, or cross, is a pair that does not include the US dollar, such as EUR/GBP, GBP/JPY or AUD/NZD.
- Exotic Currency PairAn exotic currency pair combines a major currency with the currency of a smaller or emerging economy, such as USD/TRY, USD/MXN or EUR/ZAR.