A currency pair is an excerpt of the relative value of the unit of currency against other currency units in the foreign exchange market. The currency used as a reference is called the opposite currency , quote currency or the currency and currency quoted in relation to it is called the base currency or currency transaction.
Currency pairs are sometimes later written by combining the ISO currency code (ISO 4217) of the base currency and counter currency, separating them with a slash character. Often the slash character is removed, alternatively, the slash can be replaced by and others. The widely traded currency pair is the euro's relationship to the US dollar, which is designated as EUR/USD. The quotation EUR/USD 1.2500 means one euro is exchanged for 1.2500 US dollars. Here, EUR is the base currency and USD is the quote currency (counter currency). This means that 1 Euro can be redeemed to 1.25 US Dollars.
The most traded currency pairs in the world are called Departments . They involve the euro currency, the US dollar, the Japanese yen, the pound sterling, the Australian dollar, the Canadian dollar, and the Swiss franc.
Video Currency pair
Sintaks dan kutipan
Currency quotes use the abbreviation for the currency specified by the International Organization for Standardization (ISO) in ISO 4217 standards. The major currencies and their designations in the foreign exchange market are the US dollar (USD), euro (EUR), Japanese yen (JPY) British pound (GBP), Australian dollar (AUD), Canadian dollar (CAD), and Swiss franc (CHF).
As mentioned earlier, the quotation EUR/USD 1.2500 (or EURUSD 1.2500) means that one euro is exchanged for 1.2500 US dollars. If the quotation changes from EUR/USD 1.2500 (or EURUSD 1.2500) to 1.2510, the euro has risen in relative value, as the dollar's buying strength weakens or the euro strengthens, or both. On the other hand, if EUR/USD (or EURUSD) changes from 1.2500 to 1.2490 euro becomes relatively weaker than the dollar.
Maps Currency pair
Base currency
The rules for formulating a standard currency pair notation result from the accepted priority associated with each currency.
Since it was established in 1999 and as determined by the European Central Bank, the euro has the first priority as the base currency. Therefore, all currency pairs involving it should use it as their base, listed first. For example, the US dollar and euro exchange rates are recognized as EUR/USD.
Although there is no standard regulatory body or ruling organization, the main priority ranking of the major currencies is:
- Euro
- Pound Sterling
- Australian Dollar
- New Zealand Dollar
- United States Dollar
- Canadian Dollar
- Swiss franc
- Japanese Yen
Historically, it was founded by the ranking in accordance with the relative values ​​of the currency against each other, but the introduction of the euro and other market factors have undermined the original price ranking. For example, although historically, the Japanese yen will be above the Mexican peso, the citation convention for this is now MXNJPY, ie the Mexican peso has a higher priority than the Japanese yen.
Other currencies ( Minors ) are usually quoted against USD. Quotes against currencies other than USD are referred to as currency cross, or just a cross. The most common cross is the EUR, JPY and GBP pairings, but may conflict with other currencies. The level is almost universally lowered, taking the first exchange rate against USD and multiplying it by the second exchange rate against USD.
Sometimes the term base currency may also refer to the functional currency of a bank or company; usually their domestic currency. For example, a UK bank may use GBP as the base currency for accounting, since all profits and losses are converted to sterling. If the EUR/USD position closes with earnings in USD by a UK bank, then rate-to-base will be expressed as the GBP/USD rate. This uncertainty leads many market participants to use the expression currency 1 (CCY1) and currency 2 (CCY2), where one unit of CCY1 equals the number of quoted CCY2 units.
The Major
The most traded currency pairs in the world are called Departments . They make up the bulk of the foreign exchange market, about 85%, and therefore they show high market liquidity.
The main currencies are: EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CHF, NZD/USD and USD/CAD.
Nickname
In daily foreign exchange market trading and news reporting, currency pairs are often called by nicknames rather than their symbolic nomenclature. This is often reminiscent of national or geographical connotations. The GBP/USD pair is known by merchants as cables (also cables ), which originated from the time when communication cables beneath the Atlantic Ocean synchronized the GBP/USD quote between London and the New York market. GBP is also referred to by the merchant as quid . The following nickname is generic: "Swissy" or "Euro-Swissy" for EUR/CHF, Fiber for EUR/USD, Chunnel for EUR/GBP, Loonie for USD/CAD, Aussie for AUD/USD, Gopher for USD/JPY, i> for GBP/JPY, Yuppy for EUR/JPY, and Kiwi or The Bird for the NZD/USD New Zealand Dollar pair. New innovations include Barney for USD/RUB and Betty for EUR/RUB after the fictional character of Rubbles in The Flintstones. Additionally, exotic couples have earned more esoteric nicknames such as "Glock" for COP/SGN after a service gun is often brought by a police officer (ticker can be viewed as (Cop's G (u) n)). The nickname varies between trading centers in New York, London, and Tokyo. Treatment should be taken using 'Betty, for EUR/RUB as, in the London market' Betty 'is used as cockney slang for Cable as in Betty Grable = Cable = GBP/USD.
Crossbones
Currency pairs that do not involve USD are called crossovers , such as GBP/JPY. Couples involving the euro are often called the cross euro, such as EUR/GBP.
Trading
Currencies are traded in fixed contract sizes, which are typically called lot sizes, or their multiple. The standard lot size is 100,000 units. Many retail trading companies also offer trading accounts of 10,000 units (mini lots) and some even 1,000 units (micro lots).
The official rate quoted is the spot price. However, in the trading market, currencies are offered for sale at the offer price (asking price ), and the merchants who want to buy positions try to do so at their they offer price, which is always lower or equal to the asking price. This price difference is known as spread . For example, if the EUR/USD quote is 1.3607/1.3609, then the spread is USD 0.0002, or 2 pips. In general, markets with high liquidity show smaller spreads than rarely traded markets.
Spreads are offered to retail customers with accounts in brokerage firms, rather than the large, large and varied international forex market makers between brokers. Brokers typically increase the spreads they receive from their market providers as compensation for their services to end customers, rather than charge a transaction fee. The change bureau usually has an even bigger spread.
Example: consider the EUR/USD currency pair traded on a quote of 1.33
In the case above, a person who buys 1 EUR must pay 1.33 USD; otherwise one EUR 1 sale will receive 1.33 USD (assuming no FX spread). Forex traders buy EUR/USD pairs if they are confident that the Euro will increase in value against the US dollar, buy the pair EUR/USD; this way is called long-lasting on the couple; on the contrary, will sell the pair EUR/USD, called short on the pair, if they believe the value of the Euro will fall relative to the US dollar. A pair is illustrated only one way and never reversed for trading purposes, but the buying or selling function is used when starting a trade. Buy a pair if bullish in the first position compared to the second of the pair; on the contrary, sell if it is bearish on the first compared to the second.
See also
- statistical arbitrage
- Foreign exchange options
- The strength of the currency
- Forex Signal
References
External links
Source of the article : Wikipedia
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