The currency market has remained the world’s largest and most liquid market, with trading running into trillions of dollar daily; anyone can get involved and start making money off this market, especially when trading the Yen, USD and Euro. For the newbies who are just getting started in the market, it is essential that they get acquainted with trading terminologies as their popular uses cuts across various fields. This article looks at various currency majors that investors should keenly observe.
I’ll start with the United States Dollars, which is essentially the world’s reserves currency and also the most traded currency globally. It is traded as a pair alongside other currency pairs and sure does act like a middleman during triangle currency transactions. Almost all the Regional banks use the USD in holding majority of their reserve.
The United States Dollar has remained widely accepted globally, while we find it as an official currency most times as against the local currency, and this is simply referred to as dollarization. At the same time we found the US Dollars being used in other countries/regions as alternative means of payments.
The dollar has remained a very vital part of forex trade, acting sometimes as a benchmark or a rate target for other local currencies that want to peg their currencies against the dollar rate. We’ve seen China constantly peg its currency the Yuan against the dollar amidst so much uproar from economist and regional banks. We find countries fixing their rate, rather than allow it flow freely and oscillate around its relative value.
Investors should be aware of the fact that the USD is used as a primary currency for lot commodities, like Gold (precious metals) and crude oil. Hence we find the fluctuation in the US dollar rates affecting the value of these precious metals and crude oil asides the standard factors of supply and demand.
The Euro although relatively new has gained wide acceptance amongst investors all over the globe. It has earned it self the world’s second largest reserve currency. It was introduced into the market on the 1st January, 1999, with banknotes and coinage getting introduced about 3 years thereafter.
We now had countries within Europe and Africa pegging their currencies against the Euro and at the same we the Euro being pegged to the United States dollar in a bid to stabilize its exchange rate.
We saw an increase in liquidity to any currency that pairs with the Euro. Fundamentals that affect the Eurozone can most times lead to huge trading volumes. We’ve seen investors speculate on the general health of the zone and its member states
A lot of people say the Japanese Yen is the most traded currency pair out of Asia and so many investors use this currency as a gauging tool. The Japanese economy reacts to the Yen, but we find a lot of investors out there who use the Yen to sample the Pan-Pacific region. Every investor is aware of the Yen’s carry trade capabilities. It is still possible to find the Yen trading the same fundamentals like any other currency in the market, there’s still a relationship between it and other largely traded pairs like the euro and the greenback depends solely on the Yen’s value.
Some other currencies of interest include the Great British Pound, the Swiss Franc and the Canadian Dollar/loonie. Understanding all the indices that move a currency pair is very paramount towards making it big in this business