Did you know that the equivalent of a staggering $6.6 trillion US dollars is traded every day?
The Foreign Exchange Market is the most heavily traded market in the world, with the 10 most traded currencies accounting for nearly 90% of all Forex trades. Here, we take a look at the top 10 most traded currencies last year:
*Exchange rates sourced from Google Finance on October 16th 2020.
#1 – US Dollar (USD)
The world’s most traded currency belonged to the United States of America, home of the world’s largest economy. The US dollar is also the world’s primary reserve currency.
The US dollar is held by central and commercial banks across the world, for the purposes of international transactions. Many commodities are priced in USD, including gold, oil, copper and most other metals.
Check out: History of Currency in the United States
#2- Euro [1 EUR = 1.17 USD]
The Euro is the official currency of the European Union (EU), and is currently the world’s second most traded currency. It is used by 19 of the 27 EU countries, in what is known as the Eurozone. It’s also the world’s second biggest reserve currency.
Check out: History of Currency in Germany
#3- Japanese Yen [1 JPY = 0.0095 USD]
Japan’s currency is, by far, the most traded currency in the Asian market. Oil is an important factor in determining the Yen’s value. As a major importer, high oil prices can weigh heavily on Japan’s economy.
#4 – Pound Sterling [1 GBP = 1.29 USD]
The British pound is the official currency of the United Kingdom and its territories. In recent years, its value has been affected by the UK’s changing relationship with Europe.
#5 – Australian Dollar [1 AUD = 0.71 USD]
The Australian dollar was the world’s fifth most traded currency in 2020. Australia is a major exporter of coal, iron, copper and other mined commodities. It’s also a major importer of oil. Shifts in the trading volumes and prices of these commodities can have a direct impact on the value of the Australian currency.
#6 – Canadian Dollar [1 CAD = 0.76 USD]
Like Australia, Canada is rich in natural resources and is also a major exporter of commodities. This means prices can be a critical factor in determining CAD value.
Canada’s major trading partner is the US – accounting for more than 75% of all exports and 50% of all imports. Canada’s economy and the Canadian dollar’s value tend to be sensitive to changes in the American economy and currency.
Check out: The History of Currency in Canada
#7 – Swiss Franc [1 CHF = 1.09 USD]
Switzerland has a reputation for financial services and banking secrecy. This, coupled with the country’s sound monetary policies and low levels of debt, have made CHF a ‘safe-haven’ currency.
#8- Chinese Renminbi [1 CNY = 0.15 USD]
Sometimes referred to as the ‘yuan’, China’s currency is the eighth most traded worldwide. As China is a major exporter of manufactured goods, the Renminbi’s value depends heavily on the country’s terms of trade. China’s major trading partners are the United States, Europe and Japan.
#9 – Swedish Krona [1 SEK = 0.11 USD]
Unlike the above currencies on this list, Sweden’s official currency is not a major reserve currency. Sweden’s major exports include cars, engines and telecom equipment. This can result in some volatility with demand for SEK falling in times of global economic downfall.
#10 – New Zealand Dollar [1 NZD = 0.66]
New Zealand’s official currency is also not a major reserve currency. The strength of this currency largely depends on the balance of trade with key trading partners China and Australia. New Zealand’s main exports are agricultural produce (dairy and meat), and its main imports are oil, and automobiles.
The value of many currencies has been impacted by the global COVID-19 pandemic. Those that have been hit hardest are emerging market currencies. Several of these economies are heavily reliant on oil and commodity exports, and both are currently experiencing a sharp decline in demand.
Buyers and investors are reluctant to take risks on weaker currencies, and as a result, the world’s 10 most traded currencies are likely to remain the same for the foreseeable future.
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