The currency universe: majors, minors, crosses and exotics
Learn how currency pairs are grouped, why the groups behave differently and how to judge the real cost of trading each group.
What you will learn
- How majors, minors (crosses) and exotics are defined, and why the definitions differ between sources.
- Which features make the groups behave differently: liquidity, spreads, volatility, gaps and political risk.
- How to calculate the spread-to-range ratio, a simple measure of how expensive a pair is to trade.
- Which pairs a beginner-to-intermediate trader should start with, and why.
Explanation
Quotes, base and quote currency, pips and spreads were covered in the course "Macro" (lesson "Forex Basics: Currency Pairs, Pips and Spreads"). This lesson looks at the whole currency universe and sorts it into groups that behave differently.
Every currency has a three-letter ISO 4217 code (an international standard): EUR (euro), USD (US dollar), JPY (Japanese yen), GBP (British pound), CHF (Swiss franc), AUD (Australian dollar), CAD (Canadian dollar), NZD (New Zealand dollar). The first two letters are usually the country, the third the currency name.
The four groups
- Majors: the most liquid pairs, each containing the US dollar: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, USD/CAD and NZD/USD. Some sources only count the first four.
- Minors or crosses: pairs between two major currencies without the US dollar, for example EUR/GBP, EUR/JPY, GBP/JPY, AUD/NZD. Euro crosses (EUR/xxx) and yen crosses (xxx/JPY) are the biggest families.
- Exotics: a major currency against a currency of a smaller or emerging economy, for example USD/TRY (Turkish lira), USD/ZAR (South African rand), USD/MXN (Mexican peso) or EUR/PLN (Polish zloty).
- Careful: EU regulation uses its own definition of "major" for leverage limits (any pair made of two of USD, EUR, JPY, GBP, CAD, CHF). Under that rule, AUD/USD is not a major. This is covered in lesson 10 of this course.
Why the dollar is in the middle
According to the Bank for International Settlements (BIS) Triennial Central Bank Survey of April 2025, global foreign exchange turnover was about $9.6 trillion per day, and the US dollar was on one side of 89.2% of all trades (the shares add up to 200% because every trade has two currencies). The euro followed with 28.9%, the yen with 16.8% and the pound with 10.2%. The BIS also reported that all ten most traded pairs contain the dollar. Banks often trade a cross such as EUR/PLN through the dollar or the euro, which is one reason why crosses and exotics usually cost more.
How the groups behave
| Feature | Majors | Crosses | Exotics |
|---|---|---|---|
| Liquidity (ease of trading size without moving price) | Highest | High to medium | Low, falls sharply at night and on local holidays |
| Typical spread | Tightest | Wider | Much wider, can widen many times in stress |
| Main drivers | US data, Fed and the other central bank | Relative strength of two non-dollar economies | Local inflation, politics, capital flows, the dollar |
| Gap and intervention risk | Lower | Medium | High; capital controls possible |
| Interest-rate difference | Usually small | Can be large (yen crosses) | Often very large, so overnight costs matter |
Character also differs within groups. AUD, NZD and CAD are often called commodity currencies because their economies export raw materials. JPY and CHF are often treated as safe-haven currencies that tend to gain in market stress, but this is a historical tendency, not a rule.
The spread-to-range ratio compares the spread with the typical daily movement: spread ÷ average daily range × 100. A low ratio means trading cost takes only a small bite out of a normal move.
Worked example
Hypothetical example: compare EUR/USD with USD/MXN. Assumptions: EUR/USD at 1.1000 with a spread of 0.0001 and an average daily range of 0.0070; USD/MXN at 18.0000 with a spread of 0.0050 and an average daily range of 0.1800. Position size: 10,000 units of the base currency. Commissions, swaps and taxes are excluded.
- Spread cost EUR/USD: 10,000 × 0.0001 = $1.00.
- Spread cost USD/MXN: 10,000 × 0.0050 = MXN 50.00; converted into dollars: 50 ÷ 18 ≈ $2.78.
- Spread as % of price: EUR/USD 0.0001 ÷ 1.1000 ≈ 0.009%; USD/MXN 0.0050 ÷ 18.0000 ≈ 0.028%.
- Spread-to-range ratio: EUR/USD 0.0001 ÷ 0.0070 ≈ 1.4%; USD/MXN 0.0050 ÷ 0.1800 ≈ 2.8%.
Result: in this example the exotic is about twice as expensive relative to its normal daily movement, and the cost would rise further if the spread widened at night.
Common mistake
Practice activity
On paper, classify these pairs as major, cross or exotic: GBP/JPY, USD/CAD, EUR/HUF, AUD/NZD, USD/ZAR. Then calculate the spread-to-range ratio for a hypothetical GBP/JPY with a spread of 0.03 and an average daily range of 1.50.
Show solution
GBP/JPY: cross. USD/CAD: major. EUR/HUF: exotic (Hungarian forint). AUD/NZD: cross. USD/ZAR: exotic.
Ratio: 0.03 ÷ 1.50 × 100 = 2.0%. This is higher than the EUR/USD example (1.4%) but lower than the USD/MXN example (2.8%).
Limitations: average range and spread change over time and between brokers; use your own broker's data for a real comparison.
Key takeaways
- Majors contain the US dollar and are the most liquid; crosses exclude the dollar; exotics include an emerging or smaller-economy currency.
- The BIS 2025 survey shows the dollar on one side of 89.2% of trades, which explains its central role.
- Liquidity, spreads, interest differences and political risk differ strongly between groups.
- Compare pairs in percent and with the spread-to-range ratio, not in raw pips.
Next step
In the next lesson you will see how liquidity changes through the trading day across the Sydney, Tokyo, London and New York sessions.
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