Major Currencies
The foreign exchange market, commonly known as the forex market, is a decentralized global market where currencies are traded. The major currencies traded in the forex market are known as the “major currency pairs” and they include:
US Dollar (USD): The US dollar is the world’s most traded currency and is involved in around 88% of all forex transactions. It is the official currency of the United States and is widely accepted as a global reserve currency.
Euro (EUR): The euro is the official currency of the European Union and is involved in around 32% of all forex transactions. It is the second-most traded currency in the world and is widely accepted as a global reserve currency.
Japanese Yen (JPY): The Japanese yen is the official currency of Japan and is involved in around 16% of all forex transactions. It is the third-most traded currency in the world and is widely used as a funding currency for carry trades.
British Pound (GBP): The British pound is the official currency of the United Kingdom and is involved in around 13% of all forex transactions. It is the fourth-most traded currency in the world and is widely used as a reserve currency.
Swiss Franc (CHF): The Swiss franc is the official currency of Switzerland and is involved in around 5% of all forex transactions. It is widely used as a safe-haven currency during times of market uncertainty.
Canadian Dollar (CAD): The Canadian dollar is the official currency of Canada and is involved in around 4% of all forex transactions. It is closely linked to the US dollar due to the close economic ties between Canada and the United States.
Australian Dollar (AUD): The Australian dollar is the official currency of Australia and is involved in around 3% of all forex transactions. It is closely linked to the commodity markets due to Australia’s significant natural resource exports.
New Zealand Dollar (NZD): The New Zealand dollar is the official currency of New Zealand and is involved in around 2% of all forex transactions. It is closely linked to the Australian dollar due to the close economic ties between the two countries.
Understanding the major currencies and their role in the forex market is essential for effective risk management in international trade and investment. Fluctuations in currency values can have a significant impact on the profitability of transactions, and businesses need to have strategies in place to manage currency risk.
