Major global FX pairs

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Currencies can be divided into groups:

Defensive currencies

Defensive currencies are those that tend to attract capital in times of fear, and include USD, the Japanese yen (JPY), the Swiss franc (CHF) and commodities like precious metals such as gold and silver. These also tend to be countries with low interest rates where people borrow money to invest in more active markets.

• Some of the most active pairs in this group include USD/JPY and USD/CHF

European currencies

European currencies such as the British pound (GBP) and the euro (EUR) also represent a group sensitive to the European economy. In recent years, these currencies have been at the centre of the sovereign debt crisis with bailouts and government austerity programs having a major impact on sentiment.

• Key pairs in this group include EUR/USD and GBP/USD

Currencies of resource exporters

Currencies of resource exporters are particularly sensitive to swings in commodity prices. The Canadian dollar (CAD) and Norwegian krone (NOK) tend to be more sensitive to crude oil, with the Australian dollar (AUD) and the New Zealand dollar (NZD) more sensitive to metal and grain prices, and the South African rand (ZAR) influenced by precious metal price trends.

• Popular pairs in this group include USD/CAD, AUD/USD, NZD/USD, USD/NOK and USD/ZAR

Cross pairs

Currency pairs that do not involve the US dollar are known as cross pairs. The reason for this is that the value of the cross pair is set by the relation of each currency to the US dollar. Otherwise, arbitrage opportunities would present themselves.

Some of the more popular cross pairs tend to occur within regions outside of North America such as EUR/GBP, EUR/CHF, AUD/NZD, EUR/JPY and GBP/JPY.

Resource currencies can also give exposure to certain trends. For example, Australia is a big exporter of metals and grains and its largest customer is China.

Canada is a big exporter of crude oil, and metals and grains to a lesser extent, and its main customer is the US. As such, AUD/CAD is not only seen as a play between metals and energy but also as a play on China and the US.