What are The Most Traded Currencies in the Forex Exchange Market and Why are They Traded Widely?
Forex trading has become popular in recent years as now many traders have come to know that forex rate market offers many benefits to investors of all sizes. Beginners should know the basis of the market. One of the important step in understanding the market is that to be familiar with popular currencies. Here is the list of most traded currencies in the world:
The US Dollar: It is the most traded currency in the market. It is found in a pair with almost all main currencies in the world. It plays main role in triangular currency transactions as here it acts as intermediate. All central banks and other investment firms hold USD. This is because it is called as global reserve currency.
The U.S. dollar has global acceptance that is why some countries use it as their official currency. Moreover, it is widely accepted in other nations too. While maintaining their official currency many countries use dollar as an informal alternative form of payment.
Many countries fix their target of increasing the value of their currency to the USD’s value. Another feature of the US dollar is that it is considered standard currency in the commodity market.
The Euro: It is not only the second most traded currency but also the world’s second largest reserve currency. It is the official currency of the nations which come within the Eurozone. After dollar, some countries peg their currencies to the USD to stabilise the currency exchange rates. Experts say that this currency adds liquidity to any currency pair.
The Japanese Yen: This currency is mostly traded out of Asia. It is known in the Forex market as a carry trade component. Experts say that constant borrowing of the Japanese currency has made appreciation difficult. The Japanese yen is pitted against higher-yielding currencies. So, according to the investors, the investment should be done in yen on a longer-term basis.
The British Pound: It is the fourth most traded currency in the world. Due to its relative value to the other global currencies, it works as a large reserve currency. Political events widely affect the value of the British pound. This currency has high-value that’s why it also acts as a very liquid component in the forex market.
The Swiss Franc: It is considered as a “neutral” currency. It is also referred as a safe haven in forex market as it tends to move in a negative correlation to more volatile commodity currencies. The Swiss National Bank is quite active in the market to decrease volatility and keep interest rates in line.
