3 Most Popular Currencies for Trading
The largest and the most liquid market is Forex with at least trillion dollars being traded between the parties across the globe in a single day. In order to understand the market, let us first gain some clarity on some of the commonly traded currencies. Here are the 3 major currencies in which trading takes place.
1. The U.S. Dollar
Sometime back, the US Dollar is also known as the greenback and it is the first and foremost instrument to be used in trading as it is the easiest and most traded currency on the plant.
It is interesting how a US dollar is found in a currency pair with all the other currencies as well. It can act as an intermediary in the triangular currency transactions. This is also because of fact that the greenback acts as an unofficial global reserve currency that is held by nearly every central bank and institutional investment entity in the world. Not just that it is globally accepted as an additional currency, in some coin tries it is also used in lieu of a local currency, this practice is known as dollarization. The US Dollar is widely used and accepted by a lot many other nations as an informal form of payment while the countries maintain their official currencies.
2. The EURO
The Euro is yet another popular currency for trading beyond boundaries. Please note that the official currency of the majority of the nations within the eurozone, the euro was introduced to the world markets on Jan. 1, 1999, with banknotes and coinage entering circulation three years later. The Euro is widely used and one of the most trusted currencies of all the time. It is quite prevalent in the market of Forex and said to add liquidity to any pair of currency it is traded with. The euro is commonly traded by speculators as a play on the general health of the eurozone and its member nations.
3. The Great British Pound
Popularly known as the pound sterling, it is the most traded currency in the foreign market. In order to value its historical pride and safeguard the domestic interest, the country never opted for the euro as its official currency. Thus, at times Pound is seen as a pure-play in the United Kingdom. Forex traders will often estimate the value of the British pound based on the overall strength of the British economy and political stability of its government.
These were the three critical currencies used by traders in trade in the international market. Every currency has specific features that affect its underlying value and price movements relative to other currencies in the forex market. Understanding the factors that move a currency is a pivotal step in becoming a savvy participant in the forex market.