Cross currency pairs are innovations in foreign exchange market which make the trade much easier and more comfortable. First of all it’s important to give the definition of cross currency pairs in general and then enumerate the characteristics. Thus, cross currency pairs are those currency pairs in global Forex market in which US dollar is excluded. The examples of such pairs are: CHF/JPY, GBP/JPY, EUR/CHF, EUR/JPY, EUR/CAD, EUR/AUD, etc.
The role of cross currency pairs is immense as if we try to compare the trade of past and present it will become obvious that nowadays chances are great. There is no necessity of converting some currency into US dollar and then change the dollars with the currency desired.
On the large group of cross currency pairs there can be easily differentiated the ones which are more popular and are traded more commonly, and such pairs that are not traded so actively. Examples entering in the first group are GBP/JPY, EUR/CHF, EUR/JPY and EUR /GBP while those forming the second class are NZD/CHF, GBP/CHF, CAD/CHF, EUR/CAD and AUD/CHF.
The only shortcoming in this case is that traders not always can find the pair which they would like to trade. To overcome this problem it’s important to create a “synthetic currency pair” which is formed by the help of the US dollar acting here as a neutral currency.
From the above mentioned points it follows that traders can make profit by means of cross currency pairs which enable traders to perform trading with different currency pairs.