What is Currency Pair?

A currency pair is a price quote of the exchange rate for 2 different currencies listed in FX markets. Once an order is placed for a currency pair, the primary listed currency or base currency is bought whereas the second listed currency during a currency pair or quote currency is sold-out.

What is a Currency Pair?

A currency pair is the quotation of 2 different currencies, with the worth of 1 currency being quoted against the opposite. The primary listed currency of a currency pair is termed the base currency, and therefore the second currency is termed the quote currency.

Key Points

  • Currency pairs compare the worth of 1 currency to another—the base currency (or the primary one) versus the second or the quote currency. It indicates what quantity of the quote currency is required to get one unit of the base currency.
  • Often, to spot every currency, there's a three-letter image related to it like USD EUR INR
  • A currency pair may be a worth quote of the charge per unit for 2 different currencies listed in FX markets.
  • When an order is placed for a currency pair, the primary listed currency or base currency is bought whereas the second listed currency during a currency pair or quote currency is sold-out.

Understanding Currency Pairs

Trading currency pairs is conducted within the foreign exchange market, generally called the forex market. It's the biggest and most liquid market in the financial world. The forex market permits currencies' buying, selling, exchanging, and speculation. It conjointly permits the conversion of currencies for international trade and investment.

All forex trades involve the simultaneous purchase of 1 currency and sale of another, however, the currency pair itself is thought of as one united instrument that's bought or sold out. Once you purchase a currency try from a forex broker, you are buying the base currency and selling the quote currency. Conversely, once you sell the currency pair, you sell the base currency and receive the quote currency.

Currency pairs are quoted supported by their bid (buy) and ask costs (sell). The bid is the price at which the forex broker can buy the base currency from you in exchange for the quote or counter currency. The ask also referred to as the offer is the value that the forex brokers can sell you the base currency in exchange for the quote or counter currency.

When trading currencies, you are selling one currency to shop for another. Conversely, once trading commodities or stocks, you are using money to buy a specific unit of the commodity or some shares of a specific stock.

The EUR/USD currency pair is taken into account as the foremost liquid currency pair in the global market. The USD/JPY is the second-hottest currency pair in the world.

Factors that Impact Currency Pairs

  • Interest rates
  • Gross Domestic Product (GDP)
  • Federal Reserve actions
  • Other economic announcements

What are the several currency pairs used in the Indian stock market?

Indian Currency derivative trading is allowed in currency pairs such as USDINR (US Dollar), EURINR (Euro), GBPINR (Great Britain Pound) & JPYINR (Japanese Yen), and cross-currency pairs in EUR USD, GBP USD, and USD JPY.
   

Currency Pair  Base Currency  Quotation Currency
USDINR   US Dollar           Indian Rupee 
EURINR   Euro     Indian Rupee
GBPINR  British Pound   Indian Rupee
JPYINR       Japanese Yen   Indian Rupee

Conclusion

The complete currency pairs used to be converted as currencies come and go. Each of the currency pairs is classified according to the volume that is traded daily for a pair. 

Frequently Asked Questions

How to Compare Currency Pairs?

Currency pairs are meant to be compared against each other to know what quantity of the quote currency is needed to shop for one unit of the bottom currency. Often, to spot every currency, there's a three-letter image related to it. for example, to represent the Australian dollar in international markets, it's outlined as AUD.

What are the timings of the Forex Market?

The currency pairs in the forex market trade from Monday to Friday, it works 24/5 hours.