Traders have many assets to choose from on the Olymp Trade platform. Exchanging currencies is one of the very popular options. In fact, foreign exchange is the largest market of all. To start trading currencies you should know what currencies are best to follow. And here we present 6 of them.
Key Takeaways🔑
| →Foreign exchange is a popular option on the Olymp Trade platform, with six major currencies dominating the market. |
| →Understanding the factors influencing these currencies – USD, EUR, JPY, GBP, AUD, CAD – is crucial for effective trading. |
| →Olymp Trade offers a demo mode for new traders to practice and understand the dynamics of currency trading. |
Contents
What are the 6 major currencies?
Trading currencies is based on exchanging one currency for another. Currency number one is the U.S. dollar which is not only the most commonly traded one but also it is a reserve currency. Then, we have the euro, yen, pound and Australian and Canadian dollars. Let’s discuss them one by one.
The USD
The USD, the U.S. dollar, is the most traded currency in the world. It appears in currency pairs with all the principal currencies. The USD is kept by central banks and institutional investments all over the world making it the global reserve currency.
It is possible to pay in dollars in many countries, though they keep their official currencies. Moreover, some countries peg their currencies to the value of the USD. The purpose is to stabilise the exchange rate instead of allowing the market dictates the prices. The U.S. dollar is further used as a standard currency for many commodities making them sensitive to the dollar’s value fluctuations.
As the USD is so popularly used, you will most probably come across it in your currency trading. So you should be checking the reports about U.S. interest rates and inflation because they have an influence on the U.S. dollar’s value.
The EUR
The second most used currency is the euro. It became the official currency for most of the countries that belong to the European Union. There are countries which peg their currencies to the euro, as others do with the U.S. dollar, to stabilise the exchange rates. And due to its popularity, the euro became the second reserve currency in the world.
The EUR increases the liquidity of the currency pairs it is traded with. It reacts to political events in the eurozone. It was quite visible when the local interest rates in some countries dropped abruptly when the euro was introduced.
The JPY
Among Asian currencies, the Japanese yen is the most popular in the foreign exchange markets. It reflects the economy of Japan as well as the general state of the Pan-Pacific region. The value of the JPY is also related to the USD and the EUR currencies as the yen is widely used in the carry trade. It consists of borrowing the yen nearly cost-free because of low-interest rates and putting it into investments in the currencies that provide higher returns.
The GBP
The pound sterling or the Great British pound ranks in fourth place among most traded currencies. The U.K. belonged to the European Union until Brexit in 2020 but even then it never introduced the euro as the official currency.
The value of the GBP is correlated to the country’s political and economic situation. The British pound proved its value over years in comparison to other global currencies and so it is a major currency benchmark for a number of countries.
The AUD
The Australian dollar (called sometimes the Aussie) is among the leading currencies in the Asia-Pacific region. Its value largely depends on the situation with the Australian commodities export.
The CAD
The Canadian dollar (also known as the loonie) is, similarly to the AUD, a commodity currency. Canada is exporting so much of the goods, mainly crude oil and precious metals that the value of its currency depends on the commodities’ prices. Also, being in proximity to the U.S., the CAD reacts to the changes in the United States economy.
Pros and Cons of Trading Major Currencies 👍👎
Pros:
- High liquidity due to widespread usage
- Greater price stability compared to minor currencies
- Affected by identifiable economic and political factors
Cons:
- Can be heavily influenced by global economic events
- Competitive market may require more skill and experience
- Possible risk from currency fluctuations
| Major Currency | Key Factors Influencing Value |
|---|---|
| USD | Interest rates, inflation, global reserve status |
| EUR | Political events in the eurozone, relative value to USD |
| JPY | Economic conditions in Japan and Pan-Pacific region |
| GBP | Political and economic situation in the UK |
| AUD | Australian commodities export conditions |
| CAD | Commodities prices, economic changes in the US |
Summary
It is of great importance to know the currencies you are intending to trade. It helps to understand what drives their prices and to react accordingly. The 6 above are the most significant currencies in the foreign exchange market and they are parts of major currencies pairs.
The major currencies discussed today are the main cash used in world trade. The foreign exchange market is an interconnected system where the rate of one currency is expressed in the other currency. For example, the EURUSD exchange rate tells us the price of 1 euro in US dollars. At Olymp Trade you can trade all the major currencies, which you will find in the form of various currency pairs. The foreign exchange market is the largest market in the world. Olymp Trade has a demo mode where you can easily learn how to trade currencies.
Wish you a good trading experience!
Q&A on Trading Major Currencies 💡
- Q: What are the six major currencies?
- A: The six major currencies are the USD, EUR, JPY, GBP, AUD, and CAD.
- Q: How do economic factors influence currency value?
- A: Economic factors such as inflation, interest rates, and economic performance can affect currency value by influencing investor confidence and demand for the currency.
- Q: How does political stability affect currency value?
- A: Political stability can influence a country’s economic performance and investor confidence, which in turn can affect the value of the country’s currency.
- Q: Why is the USD the most traded currency?
- A: The USD is the most traded currency due to its status as the global reserve currency, used by central banks and institutions worldwide.
- Q: How can I practice trading currencies?
- A: Olymp Trade offers a demo mode where new traders can practice and understand the dynamics of currency trading.