Although the most popular of currency trading takes place in the dollar pairs, cross-currency pairs serve as a substitute to always trading the U.S. dollar. A cross-currency pair, or cross or crosses for short, is any currency pair that does not include the U.S. dollar.

Cross rates are subsequent from the individual USD pairs but are quoted independently from each other. Crosses enable traders to more openly target trades to specific individual currencies to take advantage of news or events that will move the price of the currency substantially up or down.

For example, your analysis may suggest that the Eurozone Euro has the worst prospects of all the major currencies going forward, based on interest rates or a dismal economic outlook. To take advantage of this, you’d be looking to sell EUR, but against which other currency? You consider the USD, potentially buying USD/EUR (buying USD/selling EUR) but then you determine that the USD’s prospects are not any better than the EUR’s.

Then Additional research on your part may point to another currency that has a far better outlook (such as high or rising interest rates or signs of a strengthening economy), say the British pound (GBP).

In this example, you would then be looking to buy the GBP/EUR cross (buying GBP/selling EUR) to target your view that GBP has the best prospects among all the major currencies and the EUR the worst. The most actively traded crosses focus on the three major non- USD currencies (namely EUR, GBP, and JPY) and are referred to as euro crosses, sterling crosses, and yen crosses.

Most Actively Traded Cross Pairs:

ISO Currency Pair Countries Market Name

EUR/JPY Eurozone/Japan Euro-yen

NZD/JPY New Zealand/JPY Kiwi-yen

GBP/JPY United Kingdom/Japan Sterling-yen

EUR/GBP Eurozone/United Kingdom Euro-sterling

EUR/CHF Eurozone/Switzerland Euro-Swiss

AUD/JPY Australia/Japan Aussie-yen