Finance

Getting To Know The Currencies in the Forex Market

Thinking of starting to do Forex trading? Before anything else, you should know that there are certain currencies that are being traded in the market. To identify which currency to trade, try to check some of their information below.

Top Three Most Traded Currencies

The American Dollar (USD) – Almost 88% of transactions in the market involve this currency. There are a couple of reasons why the USD has become the number one most traded currency in the Forex market.

Back at the end of the Second World War, the American Dollar became the reserve currency of the world when all other currencies were pegged with it. During that time, it became the only currency allowed to be converted to Gold and also the standard unit when dealing with the commodity market. It is the most stable, trustworthy, and reliable currency which is widely used in international transactions.

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The Euro (EUR) – Second to USD is Euro (EUR), the second-largest reserve currency. It is the official currency of 19 different countries in the European Union such as Spain, Slovenia, Slovakia, Portugal, Netherlands, Malta, Luxembourg, Lithuania, Latvia, Italy, Ireland, Greece, Germany, France, Finland, Estonia, Cyprus, Belgium, and Austria. This group of countries is also called the Eurozone.

The Japanese Yen (JPY) – The third most traded currency in the Forex market is the Japanese Yen (JPY). It is the official currency of Japan and the most liquid currency in Asia. It is known as the 4th most vital reserve currency next to U.S Dollar, Euro, and Pound Sterling. Japanese yen is known as a safe haven when there is high uncertainty and volatility in the market.

Top 6 Most Famous Currency Pairs

Knowing the most famous currency pairs in the Forex market means that you get to choose which currency pair to trade with high liquidity. Check them here below.

EUR/USD – Euro and U.S Dollar

This currency pair seems to have a positive correlation with GBP/USD and a negative correlation with the currency pair USD/CHF.

USD/JPY – U.S Dollar and Japanese Yen

This currency pair is the second most traded currency pair next to EUR/USD. But it is also known to be sensitive to the political sentiment of the Far East and the United States. It has a positive correlation with USD/CHF as well as the USD/CAD currency pairs

GBP/USD – Great Britain Pounds and U.S Dollar

This currency pair has a negative correlation with USD/CHF but a positive correlation with EUR/USD. The positive correlation of these two currency pairs is due to the good correlations of the euro, Swiss franc, and British pound.

AUD/USD – Australian Dollar and U.S Dollar

This currency pair has a negative correlation with USD/JPY, USD/CHF, and USD/CAD because the U.S dollar is the quote of these currencies.

USD/CAD – U.S Dollar and Canadian Dollar

USD/CAD is negatively correlated with EUR/USD, GBP/USD, and AUD/USD because the quoted currency in Forex trading is the U.S dollar.

USD/CNY – U.S Dollar and Chinese Yuan

Finally, there is USD/CNY which is the U.S dollar, and Chinese Yuan currency. Over the past few years, this currency pair has been representing 4% of the everyday trades in the market.

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