Foreign exchange market is the biggest and most liquid market that exists at the moment. Forex market connects thousands of banks, companies, governments, and traders into a single group, enabling them to conduct their business on an international level.
Like any other market, forex deals with exchanging goods – in this case these goods are currencies. In this article we bring you top 5 most tradable currencies, and thus most popular.
Also known as greenback, the US dollar is the home denomination of the world’s biggest economy – the United States. US dollar is the most traded currency on the planet, as it acts as the unofficial global reserve currency, held my almost every central bank. It is especially interesting that US dollar is used by some countries as an offical currency (as a replacement to local currency), a practice called dollarization.
Three main groups of factors that influence the US dollar are: supply and demand, sentiment and market psychology and technical factors.
Euro is the world’s second most traded currency, and is used by approximately 338 million people every day. The euro was introduced on January 1, 1999 as a virtual currency for cashless payments and accounting purposes. Banknotes and coints were launched three years later, on January 1, 2002. The European Central Bank is in charge of monetarz issues within the EU.
The Japanese yen is the third most commonly traded currency in the world. The central bank that stands behind Japanese yen is the Bank of Japan.
The Japanese yen is considered a safe haven currency, mainly due to Japan’s advanced economy with a well-educated workforce.
The British pound, also known as sterling, is the fourth most traded currency in the forex market. The UK did not accept euro as its official currency, it kept the pound for a variety of reasons, such as historic pride and maintaining control of domestic interest rates.
Due to its high value in comparison with its peers, the pound is also a significant currency benchmark for many nations and acts as a very liquid component in the forex market.
Swiss Franc is the official currency of Switzerland and it is also used in Liechtenstein.
The Swiss franc is also considered a safe haven currency, due to the stability of the Swiss government and its financial system. The country’s independence from the EU makes it immune to any negative political and economic events that may occur in the region.