Forex Currency
The most popular FX currency is the US dollar (USD). This currency is involved in over 80% of the forex trades. With the collapse of the gold standard and the adoption of the Bretton Woods system in 1944, the US dollar became the world’s reserve currency. All currencies were valued in terms of the US dollar.
The Euro (EUR) is the currency of the Eurozone, which consists of 15 member states. With over €610 billion in circulation as of December 2006, the Euro has exceeded the US dollar in terms of total cash in circulation. The value of the Euro has been affected by factors such as unstable growth rates and unemployment.
The next most common FX currency is the Great British Pound (GBP), or Pound Sterling. Its popularity has been severely affected by the rising popularity of the US dollar. The Great British Pound is traded heavily against the Euro and the US dollar. This currency is also called "cable," as it was the first currency to be traded in the forex market through trans- Atlantic cables.
The Japanese yen (JPY) is the third most-traded currency in the forex market, next only to the US dollar and the Euro. The yen has featured prominently in the carry trade for years. However, yen carry trade started unwinding when the Financial Crisis of 2008 onwards caused all countries to reduce their interest rates. This has lead to the strengthening of the yen, despite Japan’s economy being in dire straits.
The Swiss Franc (CHF) is considered as a safe currency due to the nation’s neutral and independent economic policies and private banking system. The currency lacks liquidity, which has made it highly volatile.
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