The 10 Most Traded Currencies in the Forex Market

Although there are 180 currencies worldwide, only 10 account for over 90% of forex trades. These ten currencies have high trading volumes and market liquidity, making them the most tradable. The Amazing fact about forex robot.

These ten currency pairs form the cornerstone of the forex market, often boasting high liquidity, low spreads, and an average level of volatility.

The U.S. dollar

The dollar is the world’s most widely used currency. It serves as an essential pillar in global trade and many nations use it to manage their economies. Furthermore, the dollar tends to fare better during periods of economic instability as its performance tends to improve accordingly.

The dollar is also utilized by foreign companies, entities, and individuals as an international deposit account currency known as eurodollars; furthermore, it serves as the primary currency in global commodity markets, which are all factors that make it highly desirable. Furthermore, its central bank’s ability to quickly adjust interest rates adds further appeal. Compared to this asset-backed currency alternative – which holds second place behind only gold – the euro lacks a unified treasury market, which makes its use in terms of reserves less appealing.

The Japanese yen

The Japanese yen is one of the world’s most widely traded currencies, represented by JPY and often employed in carry trades by investors who borrow it to purchase foreign bonds.

Numerous writers (Aanuma 1988; Dornbusch 1989; Black 1990; Frankel 1989b) have suggested that Japan might serve as “lender of long-term capital to the world”, similar to sterling and US during their rise as international currencies. This section presents data regarding Japan’s long-term capital outflows and their implications for its role as a global currency.

The euro

The euro is the official currency of 19 European Union countries and is managed by the ECB. It has become the second-most traded currency worldwide and constitutes an impressive share of central banks’ global foreign exchange reserves.

The EUR/USD pair, often referred to as the “fiber,” represents two of the world’s leading economies and boasts low spreads and excellent liquidity.

The British Pound (GBP) is the fourth most widely used currency, administered by the Bank of England and considered a haven during times of financial uncertainty. Furthermore, its usage remains widespread among small countries that once formed part of its Empire.

The British pound

The British Pound (GBP) is one of the world’s most traded currencies, overseen by the Bank of England and used extensively throughout British Empire colonies and territories.

The British Pound is also well-known for contributing to music and culture worldwide, such as Big Ben, Oasis, and the Rolling Stones. Unfortunately, in 2016, Britain voted to leave the European Union, which hit the currency hard.

Investors are acutely aware of the GBP when it comes to interest rate decisions from the Bank of England and consider it “quid.”

The Australian dollar

The Australian Dollar, commonly referred to as “Aussie,” is one of the world’s most actively traded currencies. As Australia relies heavily on exporting raw materials, it is known as a commodity currency and plays a critical role in Australian commerce.

The Australian Dollar (AUD) is highly susceptible to commodity price movements, as its economic prosperity relies heavily on Asia’s demand for natural resources. This makes it an attractive pairing for traders who seek to capitalize on increasing global inflation trends.

Australian interest rates remain remarkably low, which has created a trend of carry trades between AUD and JPY currencies. These trades allow traders to purchase an Australian dollar and sell Japanese yen for a yield advantage.

The Canadian dollar

Canadian currency, popularly referred to as the loonie, is closely tied to commodity prices such as oil. Canadian exports such as black crack (oil) create significant fluctuations in their prices, which lead to large shifts in the loonie’s value.

Canada is widely considered a resource-based economy and ranks tenth in terms of national economy worldwide. It produces natural resources in large amounts; gold production alone ranks seventh worldwide! Canada’s main export market is the US, making its currency vulnerable to US consumer data and economic health indicators.

The Swiss franc

The Swiss franc is widely recognized as one of the safest currencies worldwide. It is known for its stability and low-interest rates, which attract investors looking to diversify their portfolios.

Switzerland’s central bank (the SNB) has taken great care in the forex market to maintain stable currency valuation, fearing an excessively strong franc may trigger inflationary pressure and harm exports from their nation.

Trading currency pairs that contain it, like USD/CHF, offers traders access to the Swiss franc. Additionally, exchange-traded funds that track this pair provide convenient exposure without opening an individual forex account.

The Hong Kong dollar

Since 1983, Hong Kong dollars have been pegged to the US dollar via an innovative linked exchange rate system created by Financial Secretary John Bremridge after Hang Lung Bank collapsed a year earlier. Within that range, it is allowed to trade between 7.75 to 7.85 per USD.

The system self-corrects by raising or lowering interest rates as needed to maintain the exchange rate peg. Higher interest rates discourage capital outflows while encouraging inflows; additionally, this enables HKMA to fend off bearish bets and maintain stability for currency trading.

The New Zealand dollar

New Zealand currency is a favorite among traders due to its relatively high-interest rates. This makes it suitable for carry trades, where investors buy one currency and then sell another with lower yielding rates to profit from carry trades.

As a commodity currency, New Zealand Dollar (NZD) prices can be affected by agricultural prices and tourism figures; for instance, when milk powder exports increase significantly, its exchange rate tends to strengthen against US dollars.

Additionally, the NZD can be highly susceptible to central bank policy decisions. For example, if the Reserve Bank of New Zealand reduces interest rates, this could help strengthen the currency relative to USD.