What Are Currency Pairs

When you trade forex in the forex markets, you are basically trading currency pairs. In a currency pair, you are trading one currency against another. For example, the JPY/USD, the EUR/ USD, and the GBP/ EUR are all examples of currency pairs. In a currency pair, the first currency is known as the “base currency” while the other currency in the pair is referred to as the “quote currency.” For example, in the JPY/USD currency pair, the Japanese yen represents the base currency while the US dollar represents the quote currency.

When you trade forex, you are in essence comparing the strength, or the rate of exchange of the two currencies that make up the pair. This means for example, in the price quote of a currency pair, you can see the quantity of the quote currency that is required to buy a unit of the base currency. For your convenience, each currency is cited using an ISO currency code, which is a three-letter code that is applied to each fiat currency. For example, the British pound is cited as GBP while the South African rand is referred to as the ZAR.