Why currencies come in pairs
A currency only has a price relative to another currency. Asking "what is the dollar worth?" has no answer until you say in what. That is why forex is always quoted in pairs, such as EUR/USD or USD/JPY.
When you trade a pair you are doing two things at once: buying one currency and selling the other.
Reading a quote
EUR/USD = 1.0850 means one euro costs 1.0850 US dollars.
- If you think the euro will strengthen against the dollar, you buy EUR/USD.
- If you think the euro will weaken, you sell EUR/USD.
You can profit (or lose) in either direction. Selling first is called going short; buying first is going long.
Types of pairs
| Group | Examples | Typical features |
|---|---|---|
| Majors | EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, NZD/USD | Most traded, usually the tightest spreads |
| Minors (crosses) | EUR/GBP, EUR/JPY, GBP/JPY | No US dollar; spreads slightly wider |
| Exotics | USD/ZAR, USD/TRY, USD/KES | An emerging-market currency; wider spreads and sharper moves |
Most beginners start with one or two major pairs because they are liquid and cheaper to trade.
What about the Tanzanian shilling?
International brokers rarely offer USD/TZS as a tradable pair, and where it exists it is usually expensive to trade. In practice, Tanzanian traders mostly trade the major pairs, with an account held in US dollars.