CURRENCIES IN FOREX MARKET

A SNEAK PEAK
WHAT IS FOREX MARKET?

• The foreign exchange market is a global

decentralized or over-the-counter market
where currencies are traded.
• This market sets the exchange rates for all
currencies.
• It encompasses all elements of purchasing,
selling, and exchanging currencies at current or
fixed values.
 Currency Pairings (In Words)
MAJOR CURRENCY
PAIRS Euro and US dollar EUR/USD
• These currencies are members of
the Group of Ten (G10) currency
US dollar and Japanese yen USD/JPY
group.
• While these currencies account for
a sizable portion of economic British pound sterling and US GBP/USD
dollar
transaction activity, they are also
among the most commonly traded US dollar and Swiss franc USD/CHF
pairings for speculative purposes.
• Greater volume attracts more Australian dollar and US AUD/USD
volume. dollar
• This is because spreads between
US dollar and Canadian USD/CAD
bid and ask prices tend to dollar
decrease as volume increases.
New Zealand dollar and US NZD/USD
• There is a lot of volume in the
dollar
main pairings.
 Currency Pairings (In words)
MINOR CURRENCY
PAIRS Euro and British pound EUR/GBP
• Minor currency pairs, also known as
cross currency pairs, are pairs that Euro and Japanese Yen EUR/JPY
do not include the U.S. dollar, but do
include at least one of the world's British pound Sterling and GBP/JPY
other three major currencies. Japanese yen

• That is to say that the Japanese yen, British pound Sterling and GBP/CAD
British pound or the euro are at least Canadian dollar
one, if not both of the currencies Swiss franc and Japanese yen CHF/JPY
included in the pair.
• They represent nations with active Euro and Australian dollar EUR/AUD
trading links, which provide
substantial liquidity.
New Zealand dollar and NZD/JPY
Japanese yen
 Currency Pairings (In Words)
EXOTIC CURRENCY
PAIRS Euro and Turkish Lira EUR/TRY
• Exotic pairings include a major
currency with a currency from a
US Dollar and Hong Kong USD/HKD
developing economy (such as Turkey Dollar
or Brazil) or emerging market.
Japanese Yen and Norwegian JPY/NOK
• Exotic pairings are not as common as Krone
major or minor pairs, which implies
that spreads might be greater when New Zealand Dollar and NZD/SGD
trading them. Singapore Dollar

• While foreign currencies frequently British Pound Sterling and GBP/ZAR

fluctuate in response to changes in South African Rand
the political situation. Exotic
Australian Dollar and Mexican AUD/MXN
currencies decline rapidly during Peso
times of political unrest.
NON – DELIVERABLE FORWARD (NDF)

• A non-deliverable forward (NDF) is a two-party currency derivatives contract in

which cash flows between the NDF and prevailing spot prices are exchanged.
• The difference arising from this trade will be paid by one side to the other.
• NDFs are traded over the counter (OTC) and are often quoted for time periods
ranging from one month to one year.
• They are most commonly quoted and settled in US dollars and have been a popular
tool for firms seeking to hedge exposure to volatile currencies since the 1990s.
• NDFs will always be against major currencies.