What Are Currency Pairs?

A currency pair is a quotation of two currencies that shows how much of one is needed to buy one unit of the other. EUR/USD at 1.0850 means one euro costs 1.0850 US dollars. Because every forex trade involves exchanging one currency for another, the pair, rather than a single currency, is what you actually buy or sell.

Base currency and quote currency

Every pair has two parts:

• The base currency is written first. It is the currency being priced, and a pair's price is always for one unit of it.
• The quote currency (also called the counter or terms currency) is written second. It is the currency the price is expressed in.

In EUR/USD, the euro is the base and the dollar is the quote. In USD/JPY, the dollar is the base and the yen is the quote. A price of 150.25 on USD/JPY means one dollar buys 150.25 yen.

A useful habit is to read the slash as "per": EUR/USD is "dollars per euro", and USD/JPY is "yen per dollar".

How to read a currency pair price

When the price of a pair rises, the base currency has strengthened relative to the quote currency. When it falls, the base has weakened. EUR/USD moving from 1.0850 to 1.0900 means the euro has gained against the dollar; equivalently, the dollar has lost against the euro.

Most pairs are quoted to four decimal places, with a fifth for fractional precision. Yen pairs are quoted to two decimal places, with a third for fractions. This matters for measuring movement, which is covered in What Is a Forex Pip?.

Buying and selling a pair

A trade in a pair is always a trade in both currencies at once.

• Buying EUR/USD means buying euros and selling dollars. You expect the euro to rise against the dollar.
• Selling EUR/USD means selling euros and buying dollars. You expect the euro to fall against the dollar.

It is worth being precise about this because it explains a point that confuses many beginners: to bet on a stronger US dollar you may buy USD/JPY (dollar is the base) or sell EUR/USD (dollar is the quote). Both positions gain if the dollar strengthens, but they are expressed in opposite directions on the chart because the dollar sits on different sides of each pair.

Bid and ask

Brokers quote two prices for each pair. The bid is the price at which you can sell the base currency, and the ask is the price at which you can buy it. The ask is higher, and the gap is the spread.

For example, if EUR/USD is quoted at 1.08500 / 1.08512:

• A buy order is filled at the ask, 1.08512.
• A sell order is filled at the bid, 1.08500.
• The spread is 0.00012, or 1.2 pips.

Spreads differ by pair, by time of day and by broker and account type. Liquid pairs generally carry the tightest spreads. See What Is a Forex Spread? for how the spread affects your costs.

Currency codes

Currencies are identified by three-letter ISO 4217 codes. The first two letters usually indicate the country and the third the currency name.

Nicknames appear frequently in market commentary, so it helps to recognise them, but the platform will always use the ISO codes.

Why pairs are written in a fixed order

You will never see USD/EUR quoted on a trading platform. Market convention ranks the major currencies in a priority order, and the higher-ranked currency is always the base. The usual hierarchy is:

1. EUR
2. GBP
3. AUD
4. NZD
5. USD
6. CAD
7. CHF
8. JPY

That is why the euro, pound, Australian dollar and New Zealand dollar are quoted against the dollar as the base (EUR/USD, GBP/USD, AUD/USD, NZD/USD), while the dollar is the base against the Canadian dollar, Swiss franc and yen (USD/CAD, USD/CHF, USD/JPY). The convention applies to crosses too: EUR/GBP, GBP/JPY and AUD/NZD all follow the same ranking.

The practical consequence is that "the dollar strengthening" can mean a falling price on one chart and a rising price on another. Always check which side of the pair the currency you care about sits on.

Direct pairs, crosses and how cross rates are derived

Pairs that include the US dollar are sometimes called dollar pairs or direct pairs. Pairs that do not include the dollar are crosses. Historically, converting between two non-dollar currencies required going through the dollar, and cross rates are still mathematically linked to the dollar rates.

For example, if EUR/USD is 1.0850 and GBP/USD is 1.2700, then:

EUR/GBP = EUR/USD ÷ GBP/USD = 1.0850 ÷ 1.2700 ≈ 0.8543

Similarly, if USD/JPY is 150.00, then EUR/JPY = EUR/USD × USD/JPY = 1.0850 × 150.00 = 162.75.

Brokers quote crosses directly, so you never have to perform this calculation to trade, but it explains why a cross can move sharply when one of its component dollar rates moves. It also matters for pip values: when the quote currency of a pair is not your account currency, the value of a pip must be converted, which the pip calculator does for you.

Choosing a pair to trade

Pairs are usually grouped as majors, minors and exotics according to how heavily they are traded. Majors are the most liquid and typically have the tightest spreads; exotics are less liquid and more expensive to trade. Major, Minor and Exotic Currency Pairs Explained walks through the groups and what each means for a beginner.

Whichever pair you choose, remember that you are always expressing a view on two economies at once. A trade in AUD/JPY, for instance, is influenced by Australian commodity exports, Japanese monetary policy and global risk appetite all at the same time.

Key takeaways

• A currency pair prices one unit of the base currency (first) in terms of the quote currency (second).
• A rising pair means the base currency is strengthening against the quote currency.
• Buying a pair means buying the base and selling the quote; selling is the reverse.
• Brokers quote a bid (sell) and ask (buy) price; the difference is the spread.
• Pairs follow a fixed ordering convention, which is why EUR/USD exists and USD/EUR does not.
• Cross rates are derived from dollar rates, and pip values on crosses may need converting to your account currency.