There are basically 3 ways to short a currency:
1. You can sell a contract for that currency in a Futures Market.
2.
You can sell an index of that currency. For example, if you believe
that the US dollar is going to weaken, you can sell a US dollar index,
which measures the value of the USD against a basket of currencies: U.S. Dollar Index
3. You can sell that currency against another currency in the Forex market.
In
Forex all currencies are traded in pairs. Each pair’s name is an
abbreviation of the names of its currencies. There are many different
pairs but the main trading activity is concentrated in the following:
EUR/USD – Euro versus US dollar
GBP/USD – British Pound versus US dollar
USD/JPY – US dollar versus Japanese yen
USD/CHF – US dollar versus Swiss franc
USD/CAD – US dollar versus Canadian dollar
AUD/USD – Australian dollar versus US dollar
NZD/USD – New Zealand dollar versus US dollar
There are also pairs called crosses such as:
EUR/JPY – Euro versus Japanese yen
EUR/GBP – Euro versus British pound
EUR/CHF – Euro versus Swiss franc
The list goes on.
The
price of the pair states how much the first currency is worth in the
second currency denomination. For example, if the price for EUR/USD is
1.3500, this means that one Euro is currently worth US$1.35.
You
are always long or short one side of the pair against the other side of
that pair. When you buy the EUR/USD pair this means that you
simultaneously buy the Euro and sell the USD. When you short the Euro,
you basically sell the Euro and buy the USD.