4 Of The Most Popular Traded Currencies

Every day, millions of parties trade trillions of dollars in the forex market. Here are a few of the most popular currencies, and some characteristics for each.

The U.S. dollar is the most traded currency on the planet. It’s paired with every other major currency, and often acts as the intermediary in triangular transactions. The U.S. dollar is the unofficial global reserve currency – nearly every central bank and institutional investment entity holds it. Some other countries use it as their official currency, a practice known as dollarization. Many nations accept it as an informal alternative to their currency, and it acts as a benchmark for countries that peg their currencies to its value.

The euro is the second most traded currency and second largest reserve currency. It serves most Eurozone nations. Many nations in Europe and Africa peg their currencies to the euro. In the forex market, the euro adds liquidity to any currency pair with

which it trades.

The Japanese yen is the most traded Asian currency, and it measures the overall health of the Pan-Pacific region. The yen is known for its role in the carry trade of the 1990s and 2000s. With Japan’s interest rates near zero, traders borrowed the yen for low costs, and then invested in higher-yielding currencies, pocketing the difference. The carry trade has made it difficult for the yen to appreciate.

And the Canadian dollar, also called the loonie, is probably the world’s foremost commodity currency. It moves in step with the commodities market and is highly correlated to the strength of the U.S. economy.

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