What is a Currency Pair?

A currency pair is the stated value of a currency in comparison to another currency. This concept is used in the foreign exchange market to buy and sell currencies. In a pairing, the first currency stated is the base currency, while the second currency is the quote currency. In each pairing, the amount stated for the quote currency is the amount needed to buy one unit of the base currency. Thus, the assumption is that the quote currency is being sold in order to buy the base currency. A currency pairing essentially states the value of one currency in relation to another one.

Currency pairs are traded in the foreign exchange market, which is better known as the forex market. Traders use this market to buy and sell foreign currencies.

Example of a Currency Pair

For example, in the 1 GBP / 1.2 USD currency pair, it takes 1.2 U.S. dollars to buy one British pound.

Major Currency Pairs

The most frequently traded currency pairs are referred to as the majors. These currencies are the Australian dollar, Canadian dollar, euro, Japanese yen, New Zealand dollar, pound sterling, Swiss franc, and U.S. dollar.