What are major minor and exotic currency pairs?

Currency pairs are categorized based on their liquidity and trading volume. Major pairs consist of the U.S. dollar paired with another highly liquid currency. These include EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD. Majors account for approximately 75% of all daily foreign exchange market volume. They typically feature the tightest spreads and the highest market participation. Minor pairs, also known as cross-currency pairs, involve two major currencies excluding the U.S. dollar. Examples include EUR/GBP, EUR/JPY, and GBP/JPY. Because these pairs lack the U.S. dollar, they often exhibit slightly lower liquidity than major pairs, which can result in wider bid-ask spreads. Exotic pairs consist of one major currency paired with the currency of a developing or emerging economy. Examples include USD/MXN, USD/TRY, or USD/ZAR. These pairs have the lowest liquidity and highest volatility. Because of this, transaction costs are significantly higher for exotic pairs. Traders should exercise caution, as these markets are prone to sudden price swings and slippage. Trading any currency pair involves substantial risk of loss, and capital is not guaranteed.