Forex Dictionary Terms

Cross Currency Pair

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Definition – What does Cross Currency Pair mean?

Cross currency pairs are currency pairs that do not have the U.S. dollar as either the base or quote currency. Because of the central role the U.S. dollar played in the Bretton Woods agreement and the power of the U.S. economy, many traders understandably focus on currency pairs containing the dollar. That said, cross currency pairs are no longer considered obscure, with the EUR/JPY and EUR/GBP rounding out the most active pairs in the world.

ForexTerms explains Cross Currency Pair

The U.S. dollar is the most traded currency in the world and, in the past, it was sometimes the only way to exchange or estimate the relative values of two separate currencies. There are many popular cross currency pairs, but every imaginable combination of currencies worldwide may not be offered by a single broker. If a trader wants to trade a cross currency pair that doesn’t exist, he can create a synthetic currency pair by using the USD as a neutral currency so that its role long in one target currency and short in the other offsets.

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