Understanding Currency Crosses

Currency pairs that do not involve the US Dollar (USD) are referred to as crosses (or cross pairs).

Actively Traded Cross Pairs

Some of the most frequently traded crosses include:

  • Euro to Japanese Yen (EUR/JPY)
  • New Zealand Dollar to Japanese Yen (NZD/JPY)
  • British Pound to Japanese Yen (GBP/JPY)
  • Euro to British Pound (EUR/GBP)
  • Euro to Swiss Franc (EUR/CHF)
  • Australian Dollar to Japanese Yen (AUD/JPY)

Trading Characteristics and Risks

Just like major pairs, crosses share certain characteristics. However, crosses also have differentiating factors that typically result in wider spreads and generally make them riskier to trade than majors.

Factors Increasing Risk Compared to Majors

The following characteristics contribute to the higher risk profile of cross pairs:

  • Less Liquid: They are less liquid than major currency pairs.
  • More Volatile: They exhibit higher price volatility.
  • Manipulation Susceptibility: They are more susceptible to manipulation.
  • Sensitivity: They are highly sensitive to sudden political and/or financial developments.

Detailed Summary

Currency pairs that exclude the US Dollar (USD) are known as crosses (or cross pairs). While some, like EUR/JPY and GBP/JPY, are actively traded, crosses generally possess characteristics—including lower liquidity, higher volatility, and increased sensitivity to political/financial events—that result in wider trading spreads and make them inherently riskier to trade compared to major currency pairs.

Key Takeaways

  • Currency crosses are defined as currency pairs that do not involve the US Dollar (USD).
  • Actively traded cross pairs often involve the Japanese Yen (JPY), such as EUR/JPY, NZD/JPY, GBP/JPY, and AUD/JPY.
  • Cross pairs generally have wider spreads than major pairs.
  • Cross pairs are typically riskier to trade than major pairs.
  • Factors contributing to the higher risk include lower liquidity and increased price volatility.
  • Crosses are more susceptible to manipulation.
  • They are highly sensitive to sudden political or financial developments.