Foreign Exchange is by and away the biggest global market out there and the most liquid as well. Daily transaction within it amount to a few trillions of dollars regularly.
As a novice trader just starting out, you would do well to get your eye in on the most popular currencies for trading and the reasons behind them. And that is precisely what we are going to do in this article.
5 Most popular currencies in Forex Trading
1) US dollar (U.S.A)
This is a no-brainer. The American form of currency is unrivaled as the most traded in currency ever. It is vastly recognized as an intermediary between other currencies when they are being traded. In fact, it is so frequently used and accepted globally that some nations have adopted it as their official currencyas opposed to coming up with one of their own.
It is a very influential on foreign exchange rates of other currencies submitting itself as assort of benchmark by which their values are assessed. Also, it is the standard currency used to price the majority of commodities such as metals and crude oil.
2) Euro (Europe)
The euro is only second to the US dollar as a globally traded currency and globally accepted reserve currency. It is the official currency used by most countries in the European continent. And yet, it is no older than January 1st 1999. It is the benchmark currency used valuing most other currencies both in Europe and in Africa.
And with its status as a highly traded and relied upon currency globally, it is also to be found extremely active in Forex trading. It is usually placed on trades concerning the economic state of Europe in general and European nations.
3) Yen (Japan)
When it comes to Asia at least, no currency is more heavily traded than Japanese Yen. It is often the currency that is referenced when assessing the economic health of the Pan-pacific area. That includes nations such as Singapore, Thailand, and South Korea whose currencies are much less prevalent in Forex trades.
Additionally, we recognize the Japanese Yen as a top currency of Forex trading for how it was used in the carry trade. With no real interest rate present for most of the past two decades, traders have been using the currency to trade in more profitable currencies and making a sweet revenue off the value differences.
4) The English Pound (United Kingdom)
Ever since Brexit happened, the UK currency has taken a gradual dip. However, even when it was a part of the EU, it did not adopt the Euro as its official currency because – apart from losing control of interest rates domestically – it would have been a deeply unenglishmanlike thing to do. When it comes to the Forex market, traders will look at it depending on the prevailing state of the national economy and political landscape.
5) Franc (Switzerland)
It may only be number 5 among the world’s Forex market’s most popular currencies but it certainly ranks a lot higher as a safe currency to use. One of the reasons for this is that it is prone to move in a negative parallel to more heavily fluctuating currencies.
The Swiss National Bank is an active participant Forex trading in ensuring that trades involving Swiss Francs are have a tighter range keep fluctuation more controlled and predictable.
That concludes our list of the top 5 currencies used in the Foreign Exchange market. As you might have seen, there are some unique qualities about them that might appeal to you depending on which part of the world you are trading from. Keeping tabs on these will help you understand the market a lot better and expose you to more profitable opportunities in Forex trading.