WHAT IS FOREX CURRENCY PAIRS MOST LIQUID

Although the foreign exchange market or FOREX is the largest trading market in the world, their existence or operation torque retail or individual investors are largely unknown compared to bond markets and equity. 

This is in large part due to a general lack of knowledge of FOREX in the investment community, along with a lack of understanding of how and why the movement of exchange can be in one of the best investments. Adding to the mystique of this market is the lack of a center similar to the NYSE or the CME physical exchange. It is this very lack of structure that enables the Forex trade 24 hours a day, beginning the trading day in New Zealand and continuing through the time zones five days and a half per week worldwide.

Traditionally, access to the FX market was limited to the bank community where traded large blocks of currencies for commercial, hedging, or speculative purposes. Then with the advent of Brokers they have opened the doors of the trading institutions such as investment funds and money managers, as well as the merchant or retailer or private investor.

The currency pairs most liquid

Currencies, like stocks and bonds, have pairs that are very liquid currencies and others are not. The liquidity of the currencies can be characterized as those pairs that involve both economically and politically more stable economies. They include the countries that form the G7 – the United States, Japan, England, France, Germany, Italy and Canada.

The most liquid currencies including the US Dollar (USD), the Japanese Yen, the British Pound, the Euro and the Canadian Dollar. It is estimated that activities in these currencies comprise more than 80% of the daily volume of foreign exchange transactions.

Symbols of currency pairs

Currencies, like equities, have their own symbols that distinguish one from another. Since currencies are quoted in terms of the value of one against the value of another, a currency pair includes the “name” for both currencies, separated by a slash “/”. The “name” is a three-letter acronym. The first two letters are reserved in most cases to identify the country. 

The last letter is usually the first letter of the name of the currency of that country.

For example:

USD = United States Dollar

GBP = Great Britain Pound, British Pound

JPY = Japan, Yen, Japanese Yen

CAD = Canada Dollar, Canadian Dollar

CHF = Confederatio Helvetica (in Latin Swiss Confederation) Franco

NZD = New Zealand, New Zealand Dollar

AUD = Australia Dollar, Australian Dollar

NOK = Norway Krona, Norwegian Krone

Krona SEK = Sweden, Swedish Krona

The Euro is not in a particular country, you simply attributed the acronym EUR. By combining one currency with another eg EUR, with USD, we have the EUR / USD.

Base currency and counter currency

One currency in a currency pair is always more dominant than the other, and you call this currency as base currency. The base currency is identified as the first currency in a currency pair. It is also the currency that remains constant to determine the price of the currency pair. The Euro is the dominant currency basis against all world currencies. As a result, currency pairs against the EUR will be identified as EUR / USD, EUR / GBP, EUR / CHF, EUR / JPY, EUR / CAD, etc., all pairs have the EUR acronym as the first in the sequence.

The British Pound is next in the domain hierarchy currencies. The major currency pairs versus the GBP can be identified as GBP / USD, GBP / CHF, GBP / JPY, GBP / CAD, etc. 

With the exception of the EUR / GBP, GBP usually is the first currency in a currency pair.

The USD is the next dominant base currency forex. The USD / CAD, USD / JPY, USD / CHF would be the normal major currency pairs. Since the EUR and the GBP are more dominant in terms of base currencies, the dollar is quoted as EUR / USD and GBP / USD