By trading forex cross currency pairs, you provide yourself with more choices for trading opportunities because these currencies are not bound to the U.S. dollar, possibly having different price movement behaviors. Cross pairs forex providers give more currency pairs for you to find profitable opportunities. The majority of the forex markets will trade on anti-U.S. dollar or pro-U.S. dollar sentiments, and you can find new opportunities in forex cross-currency pairs.
Let’s look up the forex cross-currency pairs.
What Is Forex Cross Currency Pairs To Trade – The Ultimate Pairs
What Is a Forex Cross Currency Pair?
A forex cross-currency pair refers to a currency pair or transaction that does not involve the U.S. dollar. For example, a forex cross-currency pair transaction does not use the U.S. dollar as a contract settlement currency. A forex cross-currency pair consists of a pair of currencies traded in forex that does not include the U.S. dollar. Common forex cross-currency pairs involve the euro and the Japanese yen.
Advantages Of Forex Cross Currency Pairs And Transactions
The gold standard is the increase of global trading forex pairs at a wholesale level, forex cross currency pair transactions are part of everyday financial life. Forex cross currency pair transactions make it easier for international payments, but they have also made them markedly cheaper.
Because a certain person does not have to swap the currency into U.S. dollars first, only one spread is crossed. Because non-USD pairs are more commonly traded, the spreads have tightened making it cheaper to move from one currency to another.
Forex Cross Currency Pairs In Trading
Forex trading currency pairs can be good tools for forex traders. Some forex cross currency pairs trades can be set up to position traders on particular world events, like using the EUR/GBP to bet on the ongoing Brexit saga. The same trade might be more complex and capital intensive, setting up separate positions with the USD/GBP and USD/EUR, but this method is used to create exotic forex cross-currency pairs that are not widely traded.
Forex cross-currency pairs rates involve the Japanese yen. Many traders take advantage of the hold trade where they own a high-yielding currency, such as the Australian dollar or the New Zealand dollar, and the Japanese yen owns the low-yielding currency.
How To Trade Cross Currency Pairs
When you buy a forex cross-currency pair from a forex broker, you buy the base currency and sell the quote currency. When you sell the Currency pair correlations, you sell the base currency and receive the equivalent value of the quote currency.
Cross Currency Swap
Forex crosses-currency pairs swaps are over-the-counter (OTC) derivatives in the form of an agreement between two parties to exchange interest payments and principal denominated in two different currencies.
Forex cross-currency pair swaps are highly customizable and can include variable and fixed interest rates. The two parties are swapping amounts of money, and the cross-currency swap is not needed to be displayed on a company’s balance sheet.
Forex Trading Cross Currency Pairs List
EUR/USD is the most traded forex cross currency pairs on the market, with EUR/USD transactions making up 24.0% of daily forex trades in 2019. The EUR/USD pair comes from the fact that it is representative of the world’s two biggest economies such as the European single market and the US.
Also called ‘the gopher,’ the USD/JPY forex cross-currency pair is made up of the US dollar and the Japanese yen. It is the second most traded forex cross-currency pair on the market, representing 13.2% of all daily forex transactions in 2019.
The cross currencies in this pair are the pound sterling and the US dollar. GBP/USD is colloquially known as ‘cable’ because of the deep-sea cables used to deliver the bid and ask for quotes between London and New York. The GBP/USD pair made up 9.6% of all daily forex transactions in 2019.
AUD/USD is referred to as the ‘Aussie’, called the Australian dollar against the US dollar. In 2019, it made up 5.4% of daily forex trades. The value of the Australian dollar is chained to the value of its exports, with metal and mineral exports accounting for a large proportion of the country’s gross domestic product.
USD/CAD is called the ‘loonie of the loon bird’, which appears on Canadian dollar coins, and it is called the pairing of the US dollar and the Canadian dollar. USD/CAD transactions made up 4.4% of daily forex trades in 2019. The strength of the Canadian dollar is closely linked to the price of oil, which is Canada’s main export.
The USD/CNY forex cross-currency pair is the partnership of the US dollar and the Chinese renminbi known as the yuan, representing 4.1% of daily forex trades in 2019.
The USD/CHF forex cross-currency pair comprises the US dollar and the Swiss franc and is known as the ‘Swissie.’ The Swiss financial system has historically been a haven for investors and their capital and accounted for 3.6% of all daily forex transactions in 2019.
USD/HKD placed the Hong Kong dollar against the US dollar. This forex cross-currency pair’s trading volume more than doubled between 2016 and 2019, going from 1.5% to 3.3% of all daily forex transactions.
EUR/GBP is the euro, and the British pair is seen as one of the most difficult pairs to make accurate price predictions for because EUR and GBP have a historical link given the proximity of the UK to Europe and have strong trade ties between these two economies. Still, it made up 2.0% of daily trades in 2019, making it the ninth most traded currency pair on our list.
USD/KRW is the tenth forex cross-currency pair on this list, placing the US dollar against the South Korean won. This forex cross-currency pair made up 1.9% of daily forex transactions in 2019. In the first year, USD/KRW has made it into a list of the top ten most traded currencies.
Forex Cross Currency Pairs FAQ
#1. Which Currency Pair Is A Forex Cross?
A forex cross-currency pair consists of a pair of currencies traded in forex that does not include the U.S. dollar. Forex cross-currency pairs involve the euro and the Japanese yen.
Conclusion – Understanding Currency Pairs In Forex
At the end of the Second World War, the mass currencies were fixed and quoted against the U.S. dollar because the U.S. economy was the strongest post-war, and its most currency was fixed to gold. Classically, a certain person who wishes to exchange an amount of money into a different currency might be needed first to convert that money into U.S dollars and then convert it into the desired currency.
Forex cross-currency pairs transactions might be done under this system, but they sometimes go through a U.S. dollar calculation to verify fair settlement. The GBP/JPY cross was to help individuals in England and Japan who wanted to convert their money directly without having to convert it into U.S dollars.