There are 180 currencies in the world which are recognized by the United Nations. But do you think in forex all the possible combinations of currency pairs provide equal trading opportunities? The answer is no, they do not. In the forex market there are actually only a few major currency pairs which actually made up almost 75% of forex trading volume.
These are the most traded currency pairs in forex:
- USD/EUR: The US and European Union are the world’s largest economies that is why this pair is traded the most in the forex trader. It provides the best conditions for trading because of its high liquidity and tight spreads. Statistics show that this pair made 27.95% trading volume in 2021. Apart from being the biggest economies this pair has other factors affecting their exchange rates such as interest rates set by the major banks of these countries because higher interest means they are in higher demand which in turn give better profits.
- USD/JPY: This pair consists of US dollars and the Japanese yen, they are the second most traded pair because of the Japanese government’s policy of active stability intervention. It is commonly known as “the gopher” with trading volume of 13.34% in 2021. Among this pair, the Japanese yen is the most traded currency in Asia and the US dollar in the whole world which makes this pair high in demand by the traders.
- GBP/USD: The British pound sterling (GBP) is the official currency of England, Scotland and Wales. This pair had a trading volume of 11.27 % according to the most recent statistics. The slang name for this pair is “cable” which refers to the deep-sea cables used in earlier times to exchange price quotes between London and New York. The economies of these two currencies affects the prices of this pair, if the British economy is growing faster as compared to the American economy than it is likely for the British pound to show strength against US dollars and vice versa.
- AUD/USD: This pair includes the Australian dollar and is informally referred to as “Aussie”. This is another highly popular currency pair in the forex trading world with trading volume of 6.37%. Investors interested in this pair should closely monitor the main exports of Australia which are coal and iron ore as this contributes largely to the country’s GDP.
- USD/CAD: Canadian dollar and US dollar is obviously a very commonly traded currency pair because of them being neighbors and trading partners. The value of Canadian dollars is impacted by Oil rates as Canada is one of the key exporters of oil and oil is priced in US dollars in the world market. With 5.22% of trading volume, this currency pair is commonly known as “loonie” because of Canadian coins having loon bird on them.
- USD/CHF: A rather safer option for traders is the currency pair involving Swiss Franc (CHF) as this pair shows increase in price in highly volatile market conditions. The official currency of Switzerland acts oppositely when all the other major currencies are decreasing in value. This made this pair a safe haven for most investors, however in a stable market this pair does not provide much opportunities. USD/CHF had 4.63% trading volume in the past year and its local name is “Swisse”.
Majority of forex brokers offer these currency pairs on their platform and forex traders should know that not every pair will earn them benefits so keeping in mind this point they should decide which one is the most suitable for them.