Major, Minor, and Exotic Currency Pairs
There are three categories of currency pairs:
1. Majors
2. Minors
3. Exotics.
Majors
Major currency pairs always include the US dollar. The US Dollar became the world’s reserve currency
under the 1944 Bretton Woods agreement.
The major currency pairs are the most frequently traded pairs in the world, and they make up the
largest share of the forex market. Major currency pairs include EUR/USD, USD/JPY, GBP/USD,
USD/CHF, USD/CAD and AUD/USD.
Minors
The second category of currency pairs is the minor currency pairs. Currency pairs that include any two
of the majors except USD are known as cross currency pairs or crosses. The most actively traded cross
currency pairs include the three major non-USD currencies: EUR, JPY, and GBP. Examples of these pairs
are EUR/GBP, GBP/JPY, EUR/CAD.
Exotics
The third category of currency pairs is known as exotic currency pairs. Exotic currency pairs consist of
one major currency paired with the currency of a developing or emerging economy. Examples of such
currencies include those from Brazil, Mexico, Chile, Singapore and several European countries outside
the Eurozone. For example, such pairs could include the US dollar against the Turkish lira, or the USD
dollar against the Singapore dollar. It should be noted that these currencies may be subject to higher
volatility and wider spreads due to their low liquidity, which can make trading exotic currencies riskier
and more expensive for market participants.