Direct answer
Low liquidity pairs are usually “related” to currencies and markets that have thinner trading participation compared with major currency pairs. In practice, the relatedness is best understood as an unstable historical association: certain currency combinations and particular trading hours or venues have tended to show lower depth and higher execution friction, but this is not a reliable signal for future price behavior.
If you want to explain it independently, focus on two layers: (1) the currency’s typical liquidity environment, and (2) the market microstructure where that pair is executed (time of day, venue rules, and typical order flow). These layers can shift quickly, so the same pair can be liquid at one moment and comparatively illiquid at another.
Mechanism and definition
A “low liquidity pair” generally means that, relative to more actively traded pairs, there is less resting interest in the market. In plain terms, fewer participants may be willing to trade at all price levels, and there may be fewer buyers and sellers close to the current price. The outcome is often reflected in observable trading frictions such as wider bid–ask spreads and a higher chance that orders are filled with less favorable prices.
Because “related” is not a fixed property, the relationship usually appears in three ways:
- Currency liquidity environment: Some currencies are more sensitive to capital flows, risk sentiment, and geopolitical or macro shocks. When that sensitivity rises, liquidity can thin out.
- Market session overlap: Liquidity often varies by time. When major participants are absent or when regional sessions dominate, depth can change.
- Execution venue and provider conditions: Different providers and venues can route orders differently, apply different pricing models, and expose traders to different order-book dynamics.
So, “which currencies and markets are related” is best answered by describing where thin liquidity tends to show up: specific currency environments and specific trading hours/venues, rather than a universal list that stays valid forever.
Evidence and example-style reasoning (with assumptions)
No real-time market data is assumed here. Instead, consider a self-check model you can apply.
Assumption for the example: You observe that a currency pair consistently has wider spreads than a benchmark major pair during certain hours.
- Reasoning: If spreads widen and fewer orders sit near the mid-price, then your execution is likely interacting with thinner liquidity.
- What “related” means: The currency involved and the market session/venue where you trade are “related” to the low liquidity behavior because they influence order flow and depth.
A second example is provider-specific behavior.
- Assumption for the example: Two execution venues quote different effective spreads for the same nominal pair at the same time.
- Reasoning: Even if the underlying market has similar baseline activity, venue routing, pricing rules, and available counterparties can change the observed liquidity.
- What “related” means: The “market” part of the relationship is not just the global forex market; it includes the immediate execution pathway.
These examples show why relationships should be treated as unstable historical associations rather than deterministic rules.
Limitations and risks
Several material failure modes can break any attempt to generalize:
- Liquidity is time-varying: Depth can change within minutes due to risk events, market openings/closings, or shifting participation.
- Costs and execution matter: Even if you identify a “low liquidity” context, outcomes depend on trading costs, slippage, and how your orders are matched or filled.
- Historical association is not a predictor: Past periods of thin liquidity do not establish future bid–ask spreads, fill quality, or price movement.
- Provider conditions can dominate: Routing, quote aggregation, and internal matching differences can produce outcomes that reflect the provider more than the broader currency environment.
Finally, jurisdiction and regulatory environment can affect how trading is offered and operationally represented, which can further change observed liquidity characteristics. Those details vary by provider and location.
Verification and next question
To verify “which currencies and markets are related” for low liquidity pairs, independently check observable liquidity conditions rather than relying on a static label. A practical checklist:
- Compare spreads and effective fill prices across time windows for the same pair. - Compare the same pair across different execution venues/providers (where available) to see whether the liquidity difference is venue-driven.