Top 10 most traded currency pairs
With hundreds of currency combinations to choose from, forex is the largest and most volatile market in the world. Find out more about the ten globally most traded forex pairs.
The list and figures in this article are from the most recent Bank of International Settlements (BIS) triennial survey, which was taken in April 2019.1 This may seem outdated in 2021, but we believe that the figures are still the most authoritative available for a global view on the forex market. The BIS will next release data in late 2022.
EUR/USD
According to the survey,EUR/USD is the most traded currency pair on the market, with EUR/USD transactions making up 24.0% of daily forex trades.1 The popularity of the EUR/USD pair comes from the fact that it is representative of the world’s two biggest economies: the European single market and the US.
The high daily volume of EUR/USD transactions ensures that the pair has a lot of liquidity which generally results in tight spreads. Liquidity and tight spreads are enticing for traders because they mean that large trades can be made with little impact on the market.
The exchange rate of EUR/USD is determined by a number of factors, not least of which are the interest rates set by the European Central Bank (ECB) and the US Federal Reserve (Fed). The currency with the higher interest rates will experience an increase in demand because higher interest rates give a better return on an initial investment. If, for instance, the ECB had set higher interest rates than the Fed, it is likely that the euro would appreciate relative to the dollar.
USD/JPY
Also known as ‘the gopher’, the USD/JPY currency pair is made up of the US dollar and the Japanese yen. It is the second most traded forex pair on the market, representing 13.2% of all daily forex transactions.1
Similar to EUR/USD, USD/JPY is known for its high liquidity, something it gets from the fact that the yen is the most heavily traded currency in Asia, and the US dollar is the most commonly traded currency in the world.
In much the same way as the Fed and the ECB, the Bank of Japan (BoJ) sets the interest rates for the Japanese economy which, in turn, affects the value of the yen relative to the US dollar.
GBP/USD
GBP/USD is colloquially called ‘cable’ on account of the deep-sea cables that used to deliver the bid and ask quotes between London and New York. According to the BIS surbery, the GBP/USD accounts for 9.6% of all daily forex transactions.1
As with most other currency pairs, the strength of GBP/USD comes from the respective strength of the British and American economies. If the British economy is growing at a faster rate than that of the US, it's likely the pound will strengthen against the dollar. However, if the American economy is doing better than the British economy, the reverse is true.
Just like the first two most popular currency pairs on this list, the quote price of GBP/USD is affected by the respective interest rates set by the Bank of England (BoE) and the Fed. The subsequent differential between the interest rates on the pound and the dollar can have a great effect on the price of the GBP/USD currency pair.
AUD/USD
AUD/USD, sometimes referred to as the ‘Aussie’, represents the Australian dollar against the US dollar. It made up 5.4% of daily forex trades in the latest triennial survey.1 The value of the Australian dollar is tied closely to the value of its exports, with metal and mineral exports such as iron ore and coal accounting for a large proportion of the country’s gross domestic product (GDP).2
A slump in the value of these commodities on the world market would likely cause a reciprocal slump in the value of the Australian dollar. In the case of the AUD/USD currency pair, this means the US dollar would become stronger, so it would cost fewer US dollars to buy one Australian dollar.
Similar to the previously mentioned currency pairs, the AUD/USD exchange rate is also affected by the interest rate differential between the Reserve Bank of Australia (RBA) and the US Federal Reserve. For example, if American interest rates are low, USD would probably weaken against AUD and it would cost more US dollars to buy one Australian dollar.
USD/CAD
USD/CAD is commonly called the ‘loonie’ on account of the loon bird that appears on Canadian dollar coins, and it represents the pairing of the US dollar and the Canadian dollar. The BIS survey indicates that, USD/CAD transactions made up 4.4% of daily forex trades.1 The strength of the Canadian dollar is closely linked to the price of oil because the commodity is Canada’s main export.
Since oil is priced in US dollars on the world markets, Canada can earn a large supply of US dollars through its oil exports. As such, if the price of oil rises, it's likely that the value of the Canadian dollar will strengthen compared to the US dollar.
It's a general rule that the US dollar normally weakens when the price of oil increases, because if the dollar is weaker, more US dollars must be converted into other currencies to buy the same amount of oil as before. In turn, expensive oil means that the Canadian dollar will likely strengthen due to the close ties between the Canadian dollar and the price of oil.
As such, traders should keep an eye on the price of both Brent crude and US crude when trading USD/CAD, as any fluctuations in the oil market will likely reverberate in the exchange rate of this forex pair.
USD/CNY
The USD/CNY currency pair is the partnership of the US dollar and the Chinese renminbi – commonly known as the yuan. The pair accounted for 4.1% of daily forex trades in 2019.1
Traditionally, China is seen as having an excessively positive trade balance – in 2015, for example, it sat at $304 billion. In 2018, after the tariff war, this dropped dramatically to about $25 billion. The result was that the renminbi weakened significantly against the dollar.
Although the currency depreciated in early 2020 when news of the looming Covid-19 crisis broke, the renminbi actually appreciated against the dollar over the course of the year. In fact, China’s GDP grew by 2.3% in 2020.
With us, you can trade the USD/CNH currency pair – CNH being the offshore version of the yuan that is traded outside of mainland China. Yuan is referred to as CNY only when it’s traded in the onshore Chinese market. CNH has usually not been as tightly controlled as CNY by the Chinese government, which means it can be more volatile. This volatility can make it a better choice for speculative trading. At the same time, however, please note that any heightened volatility also increases the risk of rapid losses for traders.
USD/CHF
The USD/CHF currency pair is made up of the US dollar and the Swiss franc and is commonly known as the ‘Swissie’. USD/CHF is a popular currency pair because the Swiss financial system has historically been a safe haven for investors and their capital.
As a result, traders often turn to CHF during times of increasing market volatility, but the Swiss franc will typically see less interest from traders during times of greater market stability. During times of increased volatility, it is likely the price of this pair would drop as CHF strengthens against the USD after experiencing increased investment.
Since CHF is turned to primarily during times of economic volatility or as a safe haven, it is not as actively traded as the six preceding currency pairs on this list. However, USD/CHF still accounted for 3.6% of all daily forex transactions in the triennial survey.1
USD/HKD
USD/HKD puts the Hong Kong dollar against the US dollar. This pair’s trading volume more than doubled between 2016 and 2019 – going from 1.5% to 3.3% of all daily forex transactions.1
The rise could've been due to the Hong Kong protests which dominated 2019. The protests were a result of the attempted implementation of the Fugitive Offenders amendment bill, as well as allegations of police brutality against the people of Hong Kong.
The protests began a month or so before the data was collected, and so it is likely that they had an effect on the trading volume of USD/HKD.
The value of the Hong Kong dollar is pegged to the US dollar in a unique system known as a linked exchanged rate. The Hong Kong dollar is allowed to fluctuate within a band of HK$7.75 to HK$7.85 to US$1, and traders can take advantage of any price movements within this band. The narrow band means that the pair showed unnatural stability throughout 2020 and early 2021 – a period during which the pandemic caused extreme volatility in many other currencies.
EUR/GBP
The pairing of the euro and the British pound in the EUR/GBP pair is often seen as one of the most difficult pairs to make accurate price predictions for. This is because EUR and GBP have had a historical link given the proximity of the UK to Europe and the subsequent strong trade ties between these two economies.
Despite the supposed difficulties in predicting its movements, EUR/GBP transactions still made up 2.0% of daily trades, making it the ninth most traded currency pair on our list.1
As with the other currency pairs on this list, traders should keep an eye on any ECB and BoE announcements that could affect the exchange rates of the euro and the pound, which would increase volatility further.
In recent years, this currency pair has fluctuated in price quite unpredictably – primarily due to the uncertainty surrounding Brexit and then the pandemic. The high level of volatility can be attractive to traders, but it is important to have a risk management strategy in place before opening a position in a volatile market.
USD/KRW
USD/KRW is the tenth pair on this list, and it puts the US dollar against the South Korean won. This forex pair made up 1.9% of daily forex transactions in 2019 – the first year that USD/KRW made it into a list of the top ten most traded currencies.1
The South Korean economy has grown during the first decades of the 21st century to become the fourth largest in Asia and the tenth largest in the world - measured in terms of nominal GDP - as of August 2021. This could be a reason for the increased activity that USD/KRW has experienced, as traders and speculators seek exposure to another key Asian market, besides those of Japan, China and Hong Kong.
Economic growth in South Korea has been so impressive – especially since the end of the Korean war in 1953 – that people often refer to it as the Miracle on the Han River. This growth is now being capitalised on, and South Korea enjoys membership of the United Nations, the Organisation for Economic Co-operation and Development (OECD) and the G20, making the country and its currency an exciting opportunity for many market participants.
Forex pairs explained
Currencies are always traded in pairs because when you buy or sell one currency, you automatically sell or buy another. In every currency pair, there’s a base currency and a quote currency – the base currency appears first, and the quote currency is to the right of it.
The price displayed for a currency pair represents the amount of the quote currency you will need to spend to buy one unit of the base currency.
For example, in the EUR/USD currency pair, EUR is the base currency and USD is the quote currency. If the quote price was 1.2000, it means that one euro is worth 1.20 US dollars.
Different types of forex pairs
Broadly speaking, forex pairs can be separated into three categories. These are the majors, the commodity currencies, and the cross currencies:
• Major currencies are those most traded on the markets. Opinions differ as to how many major currency pairs there are, but most lists will include EUR/USD, USD/JPY, GBP/USD and USD/CHF
• Commodity currencies constitute currency pairs that have a value closely tied to a commodity such as oil, coal or iron ore. The commodity currencies included in this list are AUD/USD and USD/CAD
• Cross currencies are currency pairs that don’t include the US dollar. Two cross currency pairs have made it into this top ten, EUR/GBP and EUR/JPY
Most traded FX pairs summed up
• The EUR/USD leads the way in terms of daily traded volume in forex pairs
• But, there are a number of other viable currency pairs with high liquidity that you can choose from
• Before selecting a currency pair to trade, there are important considerations to take into account, including interest rate differentials, political events and commodity prices
• Carry out your own technical and fundamental analyses to assess whether the currency pair is a viable trading option at any particular point in time
• Volatility is a double-edged sword in the forex market – whereas it could present an opportunity, it also heightens the risk for loss. Always ensure that you can afford to take the risk of loss before opening a position, and take steps to manage your risk effectively
Footnotes:
1 Bank for International Settlements, 2019
2 Reserve Bank of Australia, 2021
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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