Forex is the most attractive and thus, the largest and most heavily traded market worldwide. Large financial institutions and independent traders are dealing with a multitude of currencies within this market. To dive deeper into foreign exchange or currency trading, learning all there is to know about the world’s most traded currencies is a must.
The world’s most traded currencies come from many continents, marking some of the most potent economies. In this post, we’ll cover 5 major currencies that are involved in almost 100% of all Forex trading activity globally. Don’t forget that if you’re a beginner trader, testing the waters by using demo trading accounts prior to diving in (and risking real money) is the wisest choice.
Before we proceed, here’s a quick list of 5 world’s most popular currencies for trading:
- U.S. dollar;
- Euro;
- Japanese yen;
- British pound;
- Australian dollar.
USD: It’s Got the Power
The U.S. dollar, often known as the greenback, is the most traded currency in the world. First and foremost, the U.S. is the world’s largest economy and a major force in foreign trade. Furthermore, the U.S. dollar is the world’s principal ‘reserve currency’ used by financial organizations for worldwide payments and investments. The almighty dollar is even used by some nations as their official currency (instead of their local one). And finally, the greenback is widely utilized for selling commodities.
EUR: Dollar’s Arch-Rival
The euro is the dollar’s ultimate competitor when it comes to the world of currency trading. Additionally, a multitude of countries has their currencies pegged to the euro for the purpose of creating exchange rate stability. Since the situation within the bloc impacts the euro greatly, it’s possibly the most ‘politicized’ currency within the trading market. In terms of Forex, the eurozone currency is massively traded due to its stellar reputation and the power to add liquidity to any currency pair it trades with.
JPY: Dollar’s Best Friend
The Japanese yen is the third most traded currency on the Forex market globally. Just like the U.S. dollar, the yen is treated as a safe harbor. If you’re not an expert in all-things-Forex but know a thing or two about Japan’s recent economic hardships, this statement might sound surprising to you. Nevertheless, Japan is considered the world’s third strongest economy and is currently among the world’s leading export countries. The yen’s strength is closely linked to Japan’s economic performance, primarily its manufacturing sector.
GBP: Old but Gold
Being the oldest existing currency, the British pound is the fourth most traded globally (as well as the fourth biggest reserve currency). Naturally, the pound’s value is largely dependent on the United Kingdom’s economic stability, including such parameters as inflation rate and employment information. In the past few years, Pound Sterling’s value was influenced by the United Kingdom’s leaving the European Union in 2020.
AUD: Valuable & Very Stable
The Aussie dollar is special. It’s among the major currencies of the Asia-Pacific region and the strongest currencies in the world. It’s the fifth most-traded currency on the Forex scene. AUD is considered to be one of the leading commodity currencies, which means its value is determined by price changes in Australia’s major exports (oil, coal, iron, and copper).
Analyze & Take Action
Every currency comes with certain characteristics that influence its value and price shifts in relation to its ‘neighbors’ on the Forex scene. Learning about the factors that impact a currency is a major step in elevating your trading skills to a whole new level. Now that you’ve studied this post, you’re free to start watching the trends and analyzing them for the sake of your utmost efficiency in the trading field.
