Exotic currency pairs in forex are combinations of one major currency, such as the US dollar, euro, or British pound, with the currency of a smaller or emerging economy. Examples include USD/TRY (US dollar/Turkish lira), EUR/SEK (euro/Swedish krona), and USD/THB (US dollar/Thai baht). Unlike major and minor pairs, exotic pairs are less liquid and traded less frequently, which makes them more volatile and riskier.

One of the main features of exotic pairs is their wider spreads. Brokers often charge higher transaction costs because these markets have lower trading volume and less competition among buyers and sellers. Price movements can also be sharper due to political instability, economic uncertainty, or sudden changes in monetary policy within the emerging economy.

Despite their challenges, exotic pairs attract traders looking for higher potential returns. Their volatility creates opportunities for larger price swings, but this also means greater risk of losses if not managed properly. Successful trading of exotic pairs requires careful analysis of global and local economic conditions, including inflation, interest rates, and commodity prices.

Overall, exotic currency pairs offer unique opportunities but demand stronger risk management, patience, and experience compared to trading major or minor pairs.