What is a currency pair?
For currencies traded on the foreign exchange or forex market a currency pair is the value of a currency in contrast to another currency. For example, US dollars vs Great British pounds would be written as: USD/GBP.
Where have you heard about currency pairs?
You will have heard about currency pairs if you’ve ever bought or sold currency on the Forex market. Coverage of the financial markets on TV often mentions the day's major currency movements.
What you need to know about currency pairs...
The reason currency comes in pairs like this on the Forex market is because whenever you buy a currency you're selling another.
For example, say your currency pair looked like this: USD/GBP.
The first currency shown (e.g. USD) is called your base currency. And the second currency shown (e.g. GBP) is your quoted currency.
The base currency (e.g. USD) is the currency that you're looking to buy or sell. The quoted currency (e.g. GBP) is the amount that one unit of base currency will cost you to buy.
If the USD/GBP exchange rate is 0.8 that means you will get £0.80 for each dollar you convert. The corresponding GBP/USD exchange rate would be 1.25, meaning you will get $1.25 for each pound you convert. The exchange rate will fluctuate depending on how the pound and the dollar change in value in relation to each other, and other currencies.