What are the most traded currency pairs in the world?
According to the Bank of International Settlement Survey 2022, the most commonly traded forex pairs in the world are: EUR/USD (euro dollars), USD/JPY , GBP/USD , AUD/USD and USD/CAD.
Here is the full list:
The most traded currency pair in the foreign exchange market is EUR/USD, which comprised almost one-fourth of all fx daily trades in 2019.
Large daily exchange volume gives this pair high liquidity, resulting in tight spreads, both ideal for low-impact large trades.
The rate of exchange between them is determined by the interest rates set by each market’s economy – in this case, the European Central Bank and the US Federal Reserve. The currency with the higher interest rate will offer a greater return on the initial investment.
So, if the ECB sets interest rates higher than the Federal Reserve, the euro would likely appreciate relative to the dollar.
The pair USD/JPY, or “the gopher,” is the second most traded currency pair on the foreign exchange market. In 2019, it made up just over 13% of daily fx transactions.
The yen is the heaviest-traded Asian currency, and the US dollar is the single most traded worldwide. Again, the high frequency of transactions makes this pair known for its liquidity.
The interest rate for the Japanese economy is set by the Bank of Japan, which in turn impacts its relative value to the American dollar.
The GBP/USD fx pair, or “the cable,” in reference to submarine cables connecting the transatlantic markets, is the third most traded foreign exchange pair on the market and comprised nearly 10% of daily forex transactions in 2019.
If the British economy grows, there’s a good chance the pound will become stronger relative to the dollar. In the case of the opposite, the reverse would occur.
Again, the differential in the respective interest rates of each economy will impact the quote price and the relative strength of each currency.
The currency pair AUD/USD, sometimes called “the Aussie,” is the fourth most commonly traded, amounting to just over 5% of daily 2019 transactions.
The Reserve Bank of Australia is responsible for the currency’s interest rate. If US interest rates dropped, the US dollar would become weaker relative to the Australian, meaning it would cost more to buy in USD.
Australia’s currency is strongly linked to various exports and their value as a significant portion of the country’s gross domestic product. If the exported commodities drop in value, it’s likely that the AUD will follow suit.
Often called “the loonie,” a nod to the Canadian bird and its famed coin, the currency pair USD/CAD is the fifth most traded, accounting for between four and five percent of 2019’s daily fx transactions.
Canada’s currency strength is closely tied to the price of its main export: oil. As oil prices rise, so too does the Canadian dollar’s value relative to the US dollar, especially since USD is used for oil prices worldwide.
When oil prices go up, the US dollar loses strength, as more are needed to purchase the same quantity of oil, making this commodity important to watch when considering forex trades.
Read more: >> Forex Pairs Explained <<
More Top Currency Pairs
The sixth-to-tenth most heavily traded currencies each made up roughly 2-4% of daily exchanges in 2019. They are: USD/CNY (Chinese renminbi), USD/CHF (Swiss franc), USD/HKD (Hong Kong dollar), EUR/GBP, and USD/KRW (South Korean won).
The USD/CNY pair, or “the yuan,” is the sixth most traded currency pair. Due to the US-China trade war and as the Chinese market share increases worldwide, traders should be mindful of how the situation’s developments continue to impact the market.
Often called “the Swissie,” the USD/CHF pair is exchanged at the seventh highest rate and is most active in an unstable market, as investors turn to the favorable conditions of the Swiss financial system as a safe haven during volatile times.
The US dollar against the Hong Kong dollar is the eighth-top currency pair and operates with a linked exchange rate offering a band of fluctuation for HKD to $1 USD.
Ninth among the top most traded currency pairs, and notoriously unpredictable, is EUR/GBP. In 2019, these tightly linked economies made up 2% of daily forex transactions.
Lastly, at nearly 2% of daily 2019 transactions, the tenth most traded currency pair worldwide is the US dollar against the won of South Korea, the fourth-largest Asian economy and growing.
Different types of forex pairs
Always done in pairs, each trade involves a base currency being purchased and a quote currency being sold to buy it.
Pairs are listed in the order of “base, quote.” For example, in the pair EUR/USD, if the quote price (USD) was 1.1, it would indicate that a single euro is valued at $1.10. In other words, you spend x amount of the quote currency on a single unit of the base.
Generally, there are three types of forex pairs:
- Majors: the most traded currencies (ex. EUR/USD, USD/JPY)
- Commodity currencies: values are linked to a commodity (ex. AUD/USD, USD/CAD)
- Cross currencies: non-USD (ex. EUR/JPY, EUR/GBP)
The vast market of the foreign exchange never ceases. The viability of each currency pair in forex comes with its own factors to consider, allowing traders to identify markets offering the most benefits.
Close examination of the most traded currency pairs is essential to making informed financial decisions, so be sure to keep these pairs and their characteristics in mind when navigating the foreign exchange market.