The Four Top-Traded Currency Pairs in Forex

The Four Top-Traded Currency Pairs in Forex

October 14, 2020 Off By David Dom

The forex market is where you can trade various currency pairs. However, there are only a handful of pairs that you usually have to focus on at any given time. Here, we present the four top-traded currency pairs in the forex market.

Euro/US Dollar, EUR/USD

The euro-US dollar is the most actively traded major currency pair in the world. As a matter of fact, there are lots of banks and institutions that have a group of dedicated team of traders that trade only this pair.

Even if one may be confused because the euro is just relatively new currency, it has gained tremendous influence in the financial world and has become one of the most important currencies in the world.

You have to remember that the EUR/USD has the euro as the base currency. That means all contracts and trades made with this pair are denominated in the euro. Compare that to the fact that the price movements as well as the profit and loss determinations are denominated in the US dollar.

In addition, since the US dollar is the most liquid and the world’s reserve currency, all margin payments are also denominated in the US dollar.

The advantages of trading this major currency pair include the fact that they have the lowest spreads. This leads to another benefit, which is the fact that there are lower transaction costs to be paid when trading the EUR/USD pair.

This pair has a lower spread because it’s the most liquid currency pair, with traders and market makers always willing to offer quotes on the pair.

US dollar/Swiss franc, USD/CHF

The Swiss franc is generally considered to be a safe haven currency. That is why the USD/CHF currency pair loses its value when the market thinks that the US dollar is a safe bet, while the Swiss franc gains strength when traders are in risk-off mood and seeking to protect their investments.

Apart from that, it is also very important to remember that that value of this currency pair is largely dependent on the capital flows in the Swiss banking system, which is quite popular in the world for its secrecy and privacy.

There is also the fact that Switzerland is known for its stable country and excellent economic fundamentals.

US dollar/Japanese yen, USD/JPY

The Japanese yen is the third most widely and actively traded currency in the world.  That means it’s also sports extreme importance in the realm of forex trading.

As per statistics, the trading in this currency pair alone accounts for nearly 20 percent of the forex trades in the world.

But if you’re thinking of trading this currency, you must first know that it’s a very volatile pair.  Most of the time, it’s range-bound for a long period. Then, it will suddenly fluctuate and find a new price level.  The Japanese yen also shows the greatest sensitivity to the changes in the US interest rate.

Great British pound/US dollar, GBP/USD

The economy of Britain is of extreme importance in the world. That is partly the reason why the GBP/USD pair also holds much importance in the world of forex trading. Also, this pair is one of the oldest pairs in the history of foreign exchange trading.

The Great British pound holds a massive trading volume, accounting for 8 percent of the total trading volume in the forex market. The pair is also extremely sensitive to any news relating to the US dollar.