Some currency pairs are more liquid than others, which in theory makes them easier to trade. It also means that highly liquid instruments are generally more heavily traded. Below you will find information on the most popular currency pairs with the highest trading volumes.
As a rule of thumb, it is important to be aware that a currency pair that does not involve the USD is known as a ‘Cross rate’ (or Cross). Popular Crosses include the EUR/JPY (Euro to Japanese Yen), GBP/JPY (Pound to Japanese Yen), and EUR/GBP (Euro to Pound).
Furthermore, there are a total of 8 major currency pairs; all of them involve the US Dollar. If the US dollar is not one of the currencies in the pair, it is not considered a major currency pair.
The Euro to US Dollar currency pair is the single most widely-traded Forex pair on the market and comprises the currencies of two of the world's biggest economies: Europe and the U.S. Essentially, when trading EUR/USD, traders trade the euro against the U.S. dollar. Accordingly, if the USD rises in value, the EUR/USD pair weakens, as the USD becomes stronger than the EUR.
This Forex pair falls under the Majors category, and due to its high liquidity, it tends to be somewhat less volatile than other currency pairs. However, traders should be aware that even the most liquid instruments can become highly volatile under certain conditions. Moreover, economic factors like the Fed’s Interest Rates decision, inflation, monetary policy changes, and geopolitics can affect this pair.
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Another major currency pair is the USD/JPY. The US Dollar to Japanese Yen currency pair is the second most commonly traded pair after EUR/USD. In simpler terms, this currency pair indicates the number of Japanese Yen required to purchase one US dollar. Generally, USD/JPY has very high liquidity, however, JPY can also be viewed as a ‘safe haven’ currency during periods of global economic uncertainty. However, political and economic events in China and Korea can have a notable impact on the JPY and the currency is often described as the “Gateway to the East”.
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The British Pound to US Dollar currency pair is also known as ‘Cable’ due to the fact it was the first currency pair to be traded via telephone lines, or cables that crossed the Atlantic Ocean. The United Kingdom and the United States are two of the largest western economies and share very strong trade relations. However, the ongoing uncertainty that stems from the UK’s plans to exit the EU ("Brexit") has led to greater volatility in the GBP/USD. The pound is also very heavily traded against the euro, reflected in the EUR/GBP cross pair.
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The US Dollar to Canadian Dollar currency pair is nicknamed the “Loonie,’ because it has a picture of the loon bird on it. The Canadian Dollar is strongly tied to commodities trading due to the fact that Canada is a large exporter of oil, minerals and grains. International trade flows in these commodities leads to strong liquidity in USD/CAD, however, like commodities, it can also experience high levels of volatility.
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This is the Australian Dollar to US Dollar currency pair. At certain times in history, this was the third most popular currency pair. Like Canada, Australia is a large exporter of commodities such as natural gas, coal, iron ore and agricultural products. International trade flows in these commodities leads to very strong liquidity in AUD/USD, however, it can also experience high levels of volatility.
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When choosing a currency pair to trade in the foreign exchange market, it is often advised to stick to your country’s currency, as it is likely that you will be more familiar with political and economic events that take place at home. In addition, it can be easier to research economic events and trends as they tend to be covered daily by news outlets and talked about on social media.
If you want to test your trading strategy with popular Forex pairs, try our free demo account which includes live market quotes and a range of Forex trading indicators. You’ll be able to view in real-time how the currency pairs perform and familiarise yourself with the trading tools and terminology. Forex trading does come with a large element of risk and you need to be careful.
This article contains general information which doesn't take into account your personal circumstances.
Safe Haven Currencies: What They Mean and What They Are
In addition to the aforementioned popular Forex pairs, the Forex market also includes what traders call “safe haven currencies.” This is because as much as the Forex market is liquid it can also be extremely volatile and turbulent. This means that Forex pairs that were once strong can depreciate following economic changes. However, there are some currency pairs whose value tends to remain stable or appreciated during times of economic instability.
While they are considered safe-haven currencies it should be noted that even safe-havens have the tendency to depreciate at times, and so traders should not completely rely on them.
So, what does safe haven mean exactly?
According to its literal meaning, a safe haven is “a place where somebody can go to be safe from danger or attack.” In the Forex world, this term refers to currencies that traders refer to in times of financial instability. This is because such currencies often retain their value or even climb higher as the market tumbles.
In the trading world, in general, safe havens also refer to currencies, commodities, and stocks. For example, Gold is considered a safe-haven commodity to trade as it has a long-term value.
Main Safe Haven Currencies:
US dollar - the greenback has always been a safe-haven currency for traders as it is the reserve currency of the world’s largest economy and has the most market liquidity. However, in recent years, the US dollar’s safe-haven status has been questioned, especially during 2020’s Coronavirus pandemic, where it fluctuated. The graph below describes the U.S. Dollar Index’s fluctuations in 2020 and 2021.
- Japanese yen - Historically, the Japanese yen has proved on multiple occasions its ability to rise from the ashes of market volatility and uncertainty. For example, during financial turmoil like the financial crisis of 2008, while many currencies were depreciating, the Japanese yen rose by almost 20%. However, despite its safe-haven status, the yen has at times experienced depreciation. During the Omicron variant’s outbreak, the Yen hit its 1-month low.
- Swiss franc - the Swiss franc, Switzerland’s national currency, is a safe haven currency as it also moves inversely with market turbulence. This is in part due to the stability of the Swiss government and its financial system: in fact, on multiple occasions, the Swiss franc appreciated against other safe haven currencies. For instance, during the Covid-19 pandemic in 2020, it appreciated by 10% against the US dollar.