What Are Currency Pairs? Understanding Majors, Minors, and Exotics

What Is a Currency Pair?

A currency pair shows the value of one currency against another. For example, EUR/USD = 1.10 means 1 euro equals 1.10 U.S. dollars.

• The first currency is called the base currency.
  
  

• The second currency is called the quote currency.
  
  

Major Pairs

Major pairs always include the U.S. dollar (USD) and are the most traded in the world. Examples:

• EUR/USD (Euro vs. U.S. Dollar)
  
  

• GBP/USD (British Pound vs. U.S. Dollar)
  
  

• USD/JPY (U.S. Dollar vs. Japanese Yen)
  
  

Features:

• High liquidity
  
  

• Tight spreads
  
  

• Popular with beginners and professionals alike
  
  

Minor Pairs

Minor pairs do not include the U.S. dollar but involve other strong currencies. Examples:

• EUR/GBP (Euro vs. British Pound)
  
  

• EUR/AUD (Euro vs. Australian Dollar)
  
  

• GBP/JPY (British Pound vs. Japanese Yen)
  
  

Features:

• Less traded than majors
  
  

• Slightly wider spreads
  
  

• Still liquid and accessible
  
  

Exotic Pairs

Exotic pairs include one major currency and one currency from a smaller or emerging economy. Examples:

• USD/TRY (U.S. Dollar vs. Turkish Lira)
  
  

• EUR/SEK (Euro vs. Swedish Krona)
  
  

• USD/ZAR (U.S. Dollar vs. South African Rand)
  
  

Features:

• Wider spreads
  
  

• Lower liquidity
  
  

• Can be more volatile
  
  

Why It Matters for Traders

• Costs: Majors usually have the lowest spreads.
  
  

• Opportunities: Minors and exotics may provide different market opportunities.
  
  

• Risk: Exotic pairs can move fast, which means higher risk for beginners.
  
  

Key Takeaway:

Knowing the difference between major, minor, and exotic currency pairs helps traders choose wisely and manage risks effectively. Beginners often start with major pairs before exploring others.