Exotic Currency Pairs

Exotic currency pairs are currency pairs that include the US dollar, and another currency from a riskier, emerging market currency. These currencies—USD/THB, USDMXN, USD/NOK, among others—are not highly liquid, and come with greater spreads in the bid and ask prices.

The list of exotic pairs is far longer than the list of 7 major currencies. It includes all currency pairs in which the US dollar is included, but another less commonly traded currency is pair with it. Trading these pairs can be costly since there are fewer market participants and traders buying and selling them, and brokers usually raise the costs to trade less popular pairs.

Exotic currency pair examples

Here are some examples of exotic currency pairs that trade on the fx market:

USD/HKD – Hong Kong Dollar
USD/ZAR – South African Rand
USD/THB – Thailand Baht
USD/SEK – Swedish Krona

In general, we avoid discussion on the exotic currency pairs because they put small traders at a disadvantage. It is advised that the best way to make money trading foreign exchange markets is to waste as little money as is possible. One of the best ways to waste as little money as possible is to trade currencies that are the least costly to trade.

In comparing an exotic pair USD/ZAR to the popular major EUR/USD pair, the difference in spreads (we’ll get to spreads later) is a whopping 200%. That is, traders pay three times as much to trade USD/ZAR than they do the EUR/USD! Insane!