Forex Trading Currency Pairs 5

Question 1

Which currency pair is commonly called 'The Fiber'?

Accepted Answer

EUR/USD

Answer

EUR/USD is nicknamed 'The Fiber' because the euro was introduced over fiber-optic cables, distinguishing it from the older 'Cable' (GBP/USD).

Question 2

How does a central bank interest rate hike typically affect its country's currency in a forex pair?

Accepted Answer

Strengthens the currency by attracting foreign capital

Answer

Higher interest rates attract foreign investors seeking better returns, increasing demand for the currency and strengthening it.

Question 3

In a currency pair, what does it mean when the spread widens significantly?

Accepted Answer

Market volatility or illiquidity is making trades more costly

Answer

A widening spread signals reduced liquidity or increased uncertainty, making it more expensive for traders to enter and exit positions.

Question 4

Which statement correctly describes a 'minor' or 'cross' currency pair?

Accepted Answer

Pairs that exclude the US Dollar but include two major currencies

Answer

Minor pairs (crosses) are pairs between two major currencies that do not include the US Dollar, such as EUR/GBP or AUD/JPY.

Question 5

If USD/CAD moves from 1.3500 to 1.3600, what happened?

Accepted Answer

USD strengthened against CAD

Answer

A rising USD/CAD rate means more CAD is needed to buy one USD, indicating USD appreciation relative to CAD.

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