The world’s largest and most liquid financial market is foreign exchange market. As indicated by different researchers, day by day normal exchanging volume of the worldwide forex market is around more than 5 trillion dollars.
As a result of such an immense volume, it is one of the biggest financial markets of the world. The business sectors being open round the clock, it is straightforward to invest in forex markets. The leverages can also be readily assessed using specific leverages. At the same time, it is even easier to lose money in such a volatile market. For the rookie or inexperienced traders who are starting in this forex trading arena, one of the initial steps is to gain knowledge and familiarity with the most commonly traded currency in the market. Also, the use of these currencies should be understood, not only in the forex market but also in general. Discussed below is a collection of six prominent currencies that all forex traders ought to be familiar. Also, the traits and characteristics of each of these currencies can be easily understood.
The US Dollar
The almighty dollar is one of the most traded currencies in the forex market. This currency can easily be paired with any other currency. It might be unofficial, but the dollar is the global reserve currency. It is held as a foreign exchange by most major central banks of the world. Also, due to the U.S. dollar's universal acknowledgment, it is utilized by a few nations as an official currency, in lieu of a local currency. This practice is commonly known as dollarization. The U.S. dollar, additionally, is broadly acknowledged in different countries, going about as an alternate currency of payment. Apart from a dollar, those countries also maintain their local currency.
This Dollar’s Nemesis is the second largest most traded currency in the forex market. This currency is also the world second largest reserve currency. After being introduced in the world market in January 1999, the Euro as the official currency of a large number of major nations in the eurozone. To stabilize the exchange rates, many countries in the eurozone, as well as Africa, peg their currencies to the Euro. This currency adds liquidity to any currency that it is paired with. This currency is the most politicized and very actively traded currency in the forex market.
The Japanese Yen
The Japanese Yen is often considered as technically complex but fundamentally simple currency. This is the most traded currency outside of Asia. This currency is often utilized to normalize the holistic health of the Pan-Pacific Region. Traders have invested these Japanese yens in other currencies in massive amounts. The yen’s value is significantly determined by its relationship to interest rates in the international markets of some other heavily traded currencies.
The Great British Pound.
This is the Queen’s currency. Apart from being known as the British pound, it is also known as pound sterling. In the forex markets, this is the fourth most traded currency. Due to its relative value as compared to other global currencies, the great British pound acts as a vast reserve currency. The overall strength of the British economy is the basis of determining the overall strength of this currency by the forex traders. This currency also serves as a benchmark for many nations as a very volatile ingredient of the foreign exchange market.
The Canadian Dollar
Majorly known as the loonie, the Canadian dollar moves in the market in accordance with the commodity pricing. Usually, crude oil, minerals, and precious metals move this currency. This is a very volatile currency. Forex traders use this currency to monitor and predict the movement of commodities as mentioned earlier. Since the Canadian dollar is in close proximity to the US dollar, therefore it has an inevitable impact on the US economy as well as the movements of the US Dollar.
The Swiss Franc
Swiss Franc is a banker’s currency. Most commonly it is known as the neutral currency. Because of its movement in the opposite direction to the currency of the commodity market, it is considered a haven for forex traders. With an objective of reducing volatility as well as keeping a check on interest rates, this currency is traded with a relatively tight range.
Forex market is one of the most volatile trading markets. Comprehensive knowledge of the trading currencies can make a lot of profit for its investors. The most critical step for successful trading is understanding the movements of these currencies. Whether a trader is using simple trading strategy or managing a diversified portfolio, these currencies will continue to offer amazing trading opportunities to its investors. The financial markets will continue to grow and evolve, with these currencies being an integral part of it.