Exotic Currency Pairs – AKA Exotics

When one major currency is paired with the currency of a non-major, traders refer to these pairs as exotic currency pairs. Such emerging economies might include Brazil, Mexico, Peru, Greece, or Poland, as an example. There are quite a few exotics but, depending on your forex broker, you may only see certain exotic pairs offered.

Most traders stick to pairs that contain major currencies, and so exotic pairs don’t have the same volume and are therefore less liquid. What you will find is that the spread or transaction costs associated with trading exotic pairs are usually wider. In fact, it’s not uncommon to see spreads on the exotic pairs that are two three or even four times bigger than the EUR/USD or USD/JPY, for example.

We have put together a chart with a few examples of exotics. A word of caution: since the liquidity is generally lower with exotics, they tend to be far more responsive to economic and geopolitical events. As an example, if Chile experiences a political scandal or unanticipated economic turn, it can cause an exotic pair that contains Chile’s currency to swing unexpectedly and forcefully. Naturally, traders like numbers and groups and orderly information. And so, there are other common groups of currencies from the world of FX.

G10 Currencies

The group of 10 or G10 is a group of 11 ( beats me 🙂 industrialized nations that have similar economic interests. The currencies of the G10 nations also happen to be the world’s most liquid currencies, due to both economic stability and trading volume.

The Scandies

If you are a fan of basic world geography, then you should know where Scandinavia is. It is the region in northern Europe that contains Denmark, Norway, Finland, and Sweden. In terms of FX trading, the Scandies refer to the currencies of Denmark, Norway, and Sweden, specifically. Interestingly enough, Denmark, Sweden, and Norway at one point in history had merged their currencies to a gold standard called the Scandinavian monetary union. After World War One, the gold standard was abandoned, and the Scandinavian monetary union was no more.

Central and Eastern European Currencies

CEE is the common acronym for Central and Eastern Europe. CEE includes the nations of Central Europe, the Baltics, Eastern Europe, and Southeast Europe (also known as the Balkans). Nations that are part of the CEE include Albania, Bulgaria, Croatia, the Czech Republic, Hungary, Poland, Romania, the Slovak Republic, Slovenia, Estonia, Latvia, and Lithuania. However, in terms of the FX market, there are only four main CEE currencies of note.

BRIICS

BRIICS is a term that refers to the six major emerging national economies — which include Brazil, Russia, India, Indonesia, China, and South Africa.