A currency pair is the quotation of the relative value of a currency unit against the unit of another currency in the foreign exchange market. The currency that is used as the reference is called the counter currency , quote currency or currency  and the currency that is quoted in relation is called the base currency or transaction currency.
Currency pairs are sometimes then written by concatenating the ISO currency codes ISO of the base currency and the counter currency, separating them with a slash character.
Often the slash character is omitted, alternatively the slash may be replaced by and etc. This means that 1 Euro can be exchangeable to 1. The most traded currency pairs in the world are called the Majors. They involve the currencies euro , US dollar , Japanese yen , pound sterling , Australian dollar , Canadian dollar , and the Swiss franc. The rules for formulating standard currency pair notations result from accepted priorities attributed to each currency.
From its inception in and as stipulated by the European Central Bank , the euro has first precedence as a base currency. Therefore, all currency pairs involving it should use it as their base, listed first. Although there is no standards-setting body or ruling organization, the established priority ranking of the major currencies is:. Historically, this was established by a ranking according to the relative values of the currencies with respect to each other [ citation needed ] , but the introduction of the euro and other market factors have broken the original price rankings.
Mexican peso has higher priority than Japanese yen. Other currencies the Minors are generally quoted against USD. Quotes against currencies other than USD are referred to as currency crosses, or simply crosses. Sometimes the term base currency may also refer to the [functional currency] of a bank or company; usually their domestic currency.
For example, a British bank may use GBP as a base currency for accounting, because all profits and losses are converted to sterling. The most traded pairs of currencies in the world are called the Majors. In everyday foreign exchange market trading and news reporting, the currency pairs are often referred to by nicknames rather than their symbolic nomenclature.
These are often reminiscent of national or geographic connotations. GBP is also referred to by traders as quid. The following nicknames are common: Nicknames vary between the trading centers in New York, London, and Tokyo. Currencies are traded in fixed contract sizes, specifically called lot sizes, or multiples thereof. The standard lot size is , units of the base currency. Many retail trading firms also offer 10,unit mini lot trading accounts and a few even 1,unit micro lot. The officially quoted rate is a spot price.
In a trading market however, currencies are offered for sale at an offering price the ask price , and traders looking to buy a position seek to do so at their bid price , which is always lower or equal to the asking price. This price differential is known as the spread. The spread offered to a retail customer with an account at a brokerage firm, rather than a large international forex market maker , is larger and varies between brokerages. Brokerages typically increase the spread they receive from their market providers as compensation for their service to the end customer, rather than charge a transaction fee.
A bureau de change usually has spreads that are even larger. In the above case, someone buying 1 EUR will have to pay 1. A pair is depicted only one way and never reversed for the purpose of a trade, but a buy or sell function is used at initiation of a trade.
Buy a pair if bullish on the first position as compared to the second of the pair; conversely, sell if bearish on the first as compared to the second. From Wikipedia, the free encyclopedia. Triennial Central Bank Survey. Bank for International Settlements. Retrieved 22 March Retrieved 26 January Retrieved 30 March Retrieved from " https: Use dmy dates from February All articles with unsourced statements Articles with unsourced statements from August Articles with unsourced statements from September Articles with unsourced statements from October Views Read Edit View history.
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