Exotic Currency Pair Definition | CFI JO
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exotic currency pair

A currency pair is referred to as “exotic” when it consists of one major currency and one currency from a developing or emerging nation. An example of this is the USD/TRY, a currency pair that consists of the US dollar as the [base currency] and the Turkish lira as the [counter currency]. Another example would be EUR/MXN which consists of the Euro as the base, and the Mexican peso as the counter currency.

 

While trading with exotic currency pairs has the potential to [yield] higher profits due to the wider price fluctuations, they are much riskier to trade than a standard currency pair.

 

These pairs are prone to higher levels of price [volatility], and because they are not frequently found, do not provide a great deal of[liquidity]. They are also more expensive to trade due to higher commission or [margin] requirements, and also possess a wider spread than their traditional counterparts.

 

The counter currency in an exotic currency pair can originate from one of 150 emerging countries and trading is centred around 18major currency pairs.

 

Due to the counter currency in the exotic pair being that of an emerging or developing nation, price fluctuations are deeply driven by factors such as economic or political climate, the instability of which, often results in increased volatility in the price of the pair.

 

To illustrate the difference in liquidity between standard currency pairs and exotic pairs, it was reported that in one trading year, the EUR/USD accounted for 23.1% of daily foreign exchange transactions whilst USD/TRY only accounted for 1.3%. This much lower level of demand means that it can prove harder to exit a trade. However, the liquidity of an exotic currency pair is often increased when a major currency is used as the base currency.

 

Key takeaways:

 

  • An exotic currency pair consists of one major currency and a counter currency from a developing or emerging nation
  • The profits from trading an exotic currency pair tend to be higher, but so does the risk
  • Risks include greater price volatility, lower liquidity, and higher trading costs
CFI Financial Group is an award winning global financial markets provider with over 23 years of experience and regulated entities in several jurisdictions, focused on offering impeccable execution and trading conditions including very low spreads, professional services, dedicated support and powerful tools.
CFI Financial Group is globally regulated with subsidiaries in
London • Larnaca • Beirut • Amman • Dubai • Port Louis
Credit Financial Invest for
Financial Brokerage Ltd
Al Rabieh Towers, Al Rabieh
17545

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We would like to remind that while we endeavour to provide best possible services, CFI provides execution only services and any information, reports, opinions, commentary or other material he received directly from CFI or from its employees or through any provided analytical tools or third party research provided to the client from the Company shall not be deemed as investment advice and it cannot be relied upon to make investment decisions. The Client commits to make his own research and from external sources as well to make any investment. The Client agrees that CFI will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The contents of any report provided should not be construed as an express or implied promise, as a guarantee or implication that clients will profit from the strategies herein, or as a guarantee that losses in connection therewith can, or will be limited.


Forex and CFDs are leveraged products that incur a high level of risk and a small adverse market movement may expose the client to lose the entire invested capital. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The possibility exists that you could sustain a loss in excess of your deposited funds even if a stop loss is used and therefore, you should not speculate with capital that you cannot afford to lose and be aware of trading risks. Credit Financial Invest for Financial Brokerage Ltd provides general information that does not take into account your objectives, financial situation or needs. The content of this website must not be interpreted as personal advice. Please ensure that you understand the risks involved and seek independent advice if necessary.

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