Major Forex Currencies

When it comes to the forex market, there are really only 8 main currencies that the majority of traders use in currency pairs. These 8 currencies are by far traded the most in the market and when starting up to trade forex, these will be the currencies that you will want to focus on rather than other more exotic currencies.

U.S. Dollar (USD)

The seven major forex currency pairs where the US dollar is the base or quote currency are: USD/JPY, USD/CAD, USD/CHF, EUR/USD, GBP/USD, AUD/USD and NZD/USD. The USD is also the base currency with other currencies as well but these are the main pairs that traders will want to focus their attention on when trading with the US dollar.

The USD is the official currency of the United States of America and is considered to be the standard currency unit used in commodity markets around the world. Also, it is currently the most employed reserve currency in the world, which allows the country to hold trade deficits with other countries without experiencing depreciation.

The volatility of the US dollar is most of the time low to medium. The United States economy has the strongest influence on the rest of the world, especially in medical, aerospace, computer technology and military. Since it is mainly market-oriented, corporations and private businesses usually lead the way in decision making.

Euro (EUR)

The Euro is the most used currency in member countries of the European Union. It was developed in 1999 and then put into action in 2002. It represents the result of the most important monetary reform on the entire continent. The Euro was created for the purpose of rendering free trade easier between the members of the Euro zone and at the same time looking for political integration.

Major Forex Currencies The EUR/USD currency pair has gained the nickname “fiber,” which is said to have originated from the fact that the Euro zone comprises the greatest optical fiber network in the world. The market volatility of the Euro used to be low but has been seen to have increased to medium in recent times.

The currency is managed by the European Central Bank (ECB), as well as other central banks from member countries, through the European System of Central Banks (ESCB). The ECB is the only authority that has the power to set monetary policy, in which the issuing and distribution of notes and coins are the done by the other members of the European Union.

Australian Dollar (AUD)

The Australian Dollar is the official currency for the Commonwealth of Australia. Many people also know it by the nickname “Aussie,” which even extends to the currency pair of AUD/USD. The AUD is the 6th most traded currency in the forex market and accounts for approximately 5 percent of the transactions done in forex trading.

The popularity of this currency comes from almost inexistent intervention of Australia’s government in the forex market. Combined with the benefit of Australia’s political and economic stability, the Aussie is one the most popular currency to trade and has volatility in the market as being considered low.

British Pound (GBP)

The British pound sterling is the official currency of the United Kingdom (Great Britain). Along with the US dollar, the Japanese yen, the Euro and the Swiss franc, the British pound is one of the most traded currencies in the forex market. It is also the currency with the highest value among the major currencies in the market.

The GBP/USD currency pair is commonly known as the “cable” to many traders because the rates were originally transmitted via a trans-Atlantic telegraph cable. Being that the economy in United Kingdom is one of the strongest in the world, with strong agriculture and mining, the volatility of the GBP in the market is considered low to medium.

Canadian Dollar (CAD)

The Canadian dollar is the official currency of Canada and has been also known to be called the “loonie” because of the image of a loon that appears on one of the faces of the coin. The CAD has coin and bill denominations that are similar to the USD. The forex market volatility of the Canadian dollar is low but it is strongly related to fluctuations in the price of oil.

Canada’s economy is very similar to the United States economy, having come out of a rural economy which was before World War II, and is now mainly urban and industrial. This economy is market-and production-oriented and has increased greatly in manufacturing, mining and service sectors. With the similarities to the US market, it is no surprise that the CAD’s principal trading partner is the United States.

Japanese Yen (JPY)

The Japanese yen is the official currency for the nation of Japan. After World War II, it was linked to the USD but in 1971, the yen switched to a floating exchange system. In the forex market, the volatility of the Japanese yen is usually considered to be low to medium.

Since the economy of Japan is predominantly based in the manufacturing industry, the JPY has been known as a weak currency because its circulation is limited to domestic business. This has hindered Japan’s position with regard to foreign trade and the country depends completely on oil imports and on its exports of manufactured goods.

Swiss Franc (CHF)

The Swiss franc is the official currency of Switzerland and Liechtenstein. This currency is used by the Central Bank of Switzerland. The initials CHF actually stand for “Confederatio Helvetica Franc.” The Swiss franc is often paired with the US dollar, USD/CHF, and is known among forex traders as the “Swissie.” The volatility of the Swiss franc in the forex market is considered to be low to moderate.

New Zealand Dollar (NZD)

The New Zealand dollar is the official currency of New Zealand, as well as some of the islands in the Pacific Ocean. By many traders, the NZD is known by the name “kiwi” because of the image of a kiwi bird that appears on its $1 coin. This nickname is also used in reference to the NZD/USD currency pair. The New Zealand dollar’s fore market volatility is considered to be low to medium.