Minor Currency Pair

A minor currency pair, also called a cross-rate, is a currency pair that does not involve the US dollar. Examples include EUR/GBP (euro/pound), AUD/JPY (Australian dollar/yen), and GBP/CHF (pound/Swiss franc). Minors are less liquid than major pairs but more liquid than exotic pairs, and they account for roughly 10% of daily FX volume.

How minors are constructed and priced

A minor pair like EUR/GBP does not have a separate, independent wholesale market. Instead, banks and brokers construct it from the two relevant dollar pairs. To price EUR/GBP, a dealer buys euros for dollars (EUR/USD) and simultaneously sells dollars for pounds (USD/GBP). The synthetic rate is the result.

This construction has an important consequence: the spread on a minor is the sum of the spreads on the two dollar pairs used to build it. If EUR/USD spreads 1 pip and USD/GBP spreads 1 pip, then EUR/GBP spreads roughly 2 pips. This is why minors are more expensive to trade than majors but cheaper than true exotics.

Common minor pairs

The most frequently traded minors are those between the four largest non-dollar reserve currencies: the euro, British pound, Swiss franc, and Japanese yen.

• EUR/GBP — euro vs. pound. Popular in Europe; reflects euro-area vs. UK economic divergence.
• EUR/CHF — euro vs. Swiss franc. The Swiss franc is a safe-haven currency; this pair is traded during crises.
• GBP/JPY — pound vs. yen. Historically a carry-trade favorite because the pound yields more than the yen.
• AUD/JPY — Australian dollar vs. yen. A commodity carry trade: Australia yields more and the yen is a funding currency.
• GBP/CHF — pound vs. franc. Less liquid than the pairs above but still actively traded.

Why trade minors?

A company in the eurozone that needs to pay a British supplier in pounds could convert euros to dollars, then dollars to pounds. But trading EUR/GBP directly is cheaper — fewer spreads to cross. Multinational corporations and international banks often trade minors to avoid double-conversion costs.

Speculators also trade minors when they have a view on the relative strength of two non-dollar currencies. If you believe the pound will weaken against the euro, you sell GBP/EUR (equivalently, buy EUR/GBP). You do not need to have a view on the dollar.

Minors vs. exotics

The boundary between a minor and an exotic pair is fuzzy but important for transaction costs. A minor pair, like EUR/GBP, will trade with spreads of 2–5 pips in the retail market. A true exotic, like USD/MXN (US dollar/Mexican peso), might trade 10–20 pips wide or more.

The difference comes down to trading volume and the availability of prices. Minors involve two large-economy currencies and trade actively across multiple dealers. Exotics involve smaller markets where fewer dealers make prices.

See also