Currency Pairs A guide to Analysis of EUR, GBP, and JPY for Indian Markets

The Other Currency Pairs

The preceding chapters examined the USD-INR pair in considerable depth, covering contract specifications, margin requirements, calendar spreads, statistical behaviour, and options structure. The analytical framework developed through that examination applies directly to the other currency pairs available for trading on Indian exchanges. Just as a thorough understanding of Nifty 50 futures equips a trader to navigate Bank Nifty contracts with relative ease, familiarity with USD-INR mechanics provides a reliable foundation for approaching EUR-INR, GBP-INR, and JPY-INR.

This chapter reviews the contract specifications of these three pairs, highlights the key distinctions between them, and concludes with a liquidity-based framework for prioritising which contracts to trade. The subsequent section will address technical analysis approaches applicable to currency trading before the series moves on to commodities.

EUR INR

The Euro ranks amongst the most actively traded currencies in the world. Its distinctive characteristic within the global monetary system is that it is not backed by the economic output of a single nation but by the collective economies of the European Union’s member states. This multi-economy foundation gives the Euro a degree of systemic weight that few other currencies can match, and it is part of the reason the EUR-USD pair consistently records some of the highest trading volumes of any currency pair globally.

The Reserve Bank of India has granted permission for Indian exchanges to list EUR-INR contracts, giving domestic market participants regulated access to this cross. The contract structure of EUR-INR closely mirrors that of USD-INR, with one meaningful difference: whilst the USD-INR lot size is 1,000 US Dollars, the EUR-INR lot size is 1,000 Euros.

At current exchange rates, with the EUR-INR pair trading in the range of approximately Rs. 95 to Rs. 97, the contract value of a single EUR-INR lot would be in the region of Rs. 95,000 to Rs. 97,000. Applying an approximate margin requirement of 2.5 per cent to this contract value yields a margin of roughly Rs. 2,375 to Rs. 2,425 per lot. As with USD-INR, this margin requirement remains substantially lower than the 15 to 65 per cent range typical of equity derivative contracts, reflecting the comparatively narrow trading range that currency pairs exhibit.

GBP INR

The GBP-INR contract is the second most actively traded currency pair on Indian exchanges, following USD-INR. Its contract structure is identical to EUR-INR in all respects except the underlying and lot size. The lot size for GBP-INR is 1,000 British Pounds Sterling, and the underlying represents the exchange rate for one Pound expressed in Indian Rupees.

With the GBP-INR pair currently trading in the range of approximately Rs. 108 to Rs. 112, the contract value of a single lot sits between approximately Rs. 1,08,000 and Rs. 1,12,000. The margin requirement for GBP-INR is marginally higher than for the other INR pairs, reflecting the somewhat greater volatility that Sterling can exhibit, particularly given the continued economic and political adjustments associated with Brexit discussed in an earlier chapter.

A point of interest for those engaging with international currency markets: in global Forex trading, the GBP-USD pair is commonly referred to as Cable. The term dates to the 19th century, when exchange rate information between London and New York was transmitted via a transatlantic telegraph cable. When a currency trader mentions going short on Cable, they are referring to a short position in the GBP-USD cross. This terminology is widely used across international trading desks and financial media.

JPY INR

The JPY-INR contract warrants additional attention because its structure differs from the other three pairs in one important respect. The underlying for this contract is not the exchange rate for one Japanese Yen in Indian Rupees but rather the exchange rate for 100 Japanese Yen. This distinction is necessary because the individual Yen carries a very low face value relative to the Rupee, making a single-unit quote impractical.

The lot size for JPY-INR is 100,000 units. To calculate the contract value correctly, the lot size must be divided by 100, since the price quoted reflects 100 Yen rather than one.

At current exchange rates, with 100 Japanese Yen trading at approximately Rs. 57 to Rs. 59 against the Indian Rupee, the contract value calculation proceeds as follows.

100,000 multiplied by Rs. 58, divided by 100, equals Rs. 58,000.

The pip value for JPY-INR follows the same calculation as the other INR pairs. Tick size of 0.0025 multiplied by 1,000 equals Rs. 2.50 per pip per lot, consistent across all four INR currency pairs.

The margin requirement for JPY-INR is the highest among the four currency pairs available on Indian exchanges, at approximately 4 to 4.5 per cent of contract value. This elevated margin reflects the comparatively lower liquidity in the JPY-INR contract, which can result in wider spreads and more pronounced intraday price swings. Traders considering JPY-INR positions would benefit from conducting a careful volatility assessment using historical return data before committing capital to this pair.

Spread Contracts and Liquidity Considerations

Spread contracts are available across all four currency pairs and across all active expiry months. However, a significant practical distinction exists between USD-INR and the other three pairs when it comes to spread contract liquidity. Outside of USD-INR, spread contracts in EUR-INR, GBP-INR, and JPY-INR carry very limited liquidity, which can make execution at desired prices difficult and widen the effective cost of the trade.

For traders prioritising liquidity as a key criterion when selecting which currency instruments to trade, the following order of preference reflects current market conditions on Indian exchanges.

USD-INR Futures represent the most liquid instrument in the currency derivatives segment by a considerable margin. USD-INR At the Money Options offer the next best liquidity profile within the options space. GBP-INR Futures rank third in terms of overall trading activity and ease of execution. EUR-INR Futures follow in fourth position. JPY-INR Futures, whilst accessible, carry the lowest liquidity among the four and should be approached with corresponding caution around position sizing and execution.

This liquidity hierarchy is an important practical consideration for anyone developing a currency trading strategy. Tighter bid-ask spreads, faster order execution, and greater depth of market are all characteristics of the more liquid contracts, and they directly influence the cost-effectiveness of any trading approach.

With the contract specifications and structural characteristics of all four INR currency pairs now established, the series is well positioned to address trading strategy. The following section introduces technical analysis techniques as applied to currency markets, before the broader series transitions to the commodities segment.