Shridhar G V · Follow
5 min read · Jul 25, 2023
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Explore the most traded and highly liquid currency pairs in Forex, the meaning and characteristics of currency pairs, and the importance of working with a reputed Forex data provider.
Foreign exchange is the largest marketplace globally by volume, and market participants always look for opportunities for gains as the exchange rates keep fluctuating. This is a preferred investment avenue for institutions, central banks, hedge funds, and individual traders.
Though you have hundreds of currency pairs to invest in, have you ever wondered what the most traded currency pairs are? This article takes you through the top 10 most liquid and highly traded currency pairs. So, stay tuned to know which currency pairs you should follow and trade on.
At the same time, this article helps you to understand why only a few currency pairs win great popularity. That way, you can realize the reasons behind the massive trading volume of those preferred currency pairs in the Forex market.
Let’s begin the learning voyage by understanding the meaning of currency pairs and their characteristics that market participants consider before making their trading verdicts.
In the Forex market, currencies are traded in pairs — you need to buy one by selling another. So, the exchange rates are determined by currency pair symbols, like USD/GBP and AUD/CAD.
Thus the currency pair is the exchange rate quote of two currencies traded on the Forex market. As someone places an order, the first listed or the base currency is bought, while the second or the quote currency is sold.
The number of lots of a currency pair in a particular period in the Forex market is called the trading volume. It is a significant characteristic defining the popularity of that pair among traders on a global scale.
Thus, the trading volume of a currency pair shows how actively that pair is bought and sold. Usually, the trading volume of a currency pair is shown as a percentage of the total trading volume in the Forex market. For instance, Pound Sterling/ US Dollar (GBP/USD) has a trading volume of about 9.6%.
Liquidity is among the most sought-after characteristics for market participants. It is the ability to buy or sell a currency pair without a significant difference in the exchange rate.
So, in short, market participants would be confident that the currency pair would not face a drastic decline over time, leading to financial losses. That way, better liquidity of currency pair ensures a better ROI.
Let’s take a look at the most liquid and highly traded currency pairs in the Forex market:
The most liquid forex pair, representing the US and European Union economies, accounting for 20% of the trading volume.
2. USD/JPY
Also known as gopher, the second most traded pair, influenced by US Federal Reserve and Bank of Japan interest rates.
3. GBP/USD
Known as Cable — this pair accounted for 13.65% of daily trading volume in 2021.
4. AUD/USD
It is lovingly called Aussie — it comprises 7% of daily forex trading volume, affected by global commodity prices.
5. USD/CAD
Known as Loonie, it represents oil exports from Canada and makes up 5% of forex trading volume.
6. USD/CNY
A significant pair representing the USA and China, accounting for 4% of forex trade.
7. USD/CHF
Also called Swissie — it is popular due to the stable financial system of Switzerland.
8. USD/HKD
This pair follows a linked exchange rate system. It has experienced increased trading volume due to turbulence in Hong Kong and other reasons.
9. EUR/GBP
Despite being challenging to predict, it constitutes 2% of trading volume, requiring caution after Brexit.
10. USD/KRW
This pair offers exposure to the South Korean developing economy beyond China, Japan, and Hong Kong. This pair is steadily growing in volume.
Do you ever wonder why only a handful of currency pairs are so popular among market participants? Notably, there are several economic driving factors causing fluctuations in the exchange rates of various currency pairs.
Innovations like the ability to trade online from almost anywhere have increased the participation of individual traders, central banks, other banks dealing for their clients, hedge funds, and institutions that still take the highest volume of Forex trades.
The key factors that the market participants consider are the stability of the economies in the currency pair and their liquidity. Usually, the Major Forex pairs are the most liquid as they are the currencies of the most stable economies, like the US, European Union, the UK, Switzerland, Japan, and China, to name a few.
The economic health, growth, and trade count contribute to the stability of its currency and the crosses. A country attractive to investors due to a robust financial framework, ease of doing business, and encouragement from the government through better policies always has a strong currency.
The US Dollar is the most preferred currency due to its global acceptance for trade and other transactions. It is the highest reserve currency accounting for over 60% of the reserves of various countries. Central banks retain US Dollars for their international trade and participation in the Forex market to balance their currency exchange rate.
Also Read: What is the US Dollar Index (USDX)?
Notably, the US is the largest economy and the powerhouse of international trade. As US-based companies flourish and international trade records remarkable growth with time, the US financial system contributes to about half of the total finance.
Exchange rates keep fluctuating as they are sensitive to various economic, geopolitical, and other factors. Therefore, analyzing the market is crucial to make well-informed trading decisions. Your market research and technical analysis highly rely on the Forex data source. It is crucial while dealing with the most traded currency pairs.
Working with globally recognized Forex data providers like TraderMade helps you save resources, time, and finances on gathering and aggregating Forex data feed. The data vendors source accurate Forex data from reputed banks and institutions and curate it to provide the most unbiased and low latency price feed in real time.
You get reliable and accurate market data via Forex API, WebSockets, and FIX, and download historical data in MS Excel or Google Sheets. Thus, you get the data to suit your technology needs. You can integrate the API into your applications and websites to tap a trustworthy data source for your users.
