What Is a Currency Pair?
A currency pair is a pair of two currencies that are traded in the foreign exchange market. In Forex trading, currencies are always traded in pairs because the value of one currency is determined in relation to another currency. The first currency in the pair is called the base currency, while the second currency is called the quote currency or the counter currency.
For example, in the currency pair EUR/USD, the euro is the base currency, and the US dollar is the quoted currency. The exchange rate for this pair represents the amount of US dollars that can be exchanged for one euro.
Currency pairs are usually quoted with five decimal places, with the last decimal place representing a fraction of a pip. For example, if the EUR/USD pair is quoted at 1.12345, the last digit represents a fraction of a pip, which is the smallest price movement in the Forex market.
There are three types of currency pairs: major pairs, minor pairs, and exotic pairs. Major currency pairs include the most traded currencies in the world, such as EUR/USD, USD/JPY, and GBP/USD. Minor currency pairs include less frequently traded currencies, such as USD/CAD and AUD/NZD. Exotic currency pairs involve a major currency and a currency from a developing country, such as USD/BRL (US dollar/Brazilian real) or EUR/TRY (euro/Turkish lira).
