This forex course basics section covers the currencies traded in the forex market.
The most actively traded currencies in the foreign exchange market today roughly reflect the commercial and trade activities of the nations involved.
Accordingly, the most commonly traded currencies tend to be from major, developed nations. These national currencies account for the majority of forex dealing volume, and they trade most actively in pairs against the U.S. Dollar.
Most Active Currencies Traded
The U.S. Dollar is by far the most actively traded currency, being the base or counter currency on over 85% of all foreign exchange transaction around the world.
Furthermore, the Euro against the U.S. Dollar makes up the most actively traded currency pair in the foreign exchange market. Trading in EUR/USD alone makes up almost 30% of total daily worldwide forex trading volume.
After the Euro/ Dollar pair, the second most actively traded currency pair consists of the U.S. Dollar against the Japanese Yen or USD/JPY. The third most actively traded currency pair is the British Pound Sterling quoted against the U.S. Dollar or GBP/USD. This latter pair is also commonly known as “Cable” among professional forex dealers for historical reasons.
Currencies have three letter symbols assigned to them by the International Organization of Standards or ISO that are commonly used in the forex market to unambiguously refer to a currency. These symbols are known as ISO 4217 codes.
The code is structured with the first two letters consisting of the ISO 3166 code, or country code, also known as the country Internet code. The third letter of the ISO 4217 code represents the first letter of the currency, for example, the D in USD stands for Dollar, while the P in GBP stands for Pounds.
A table below indicates the nations whose currencies make up the group of so-called major currencies in approximate order of trading volume seen in the forex market. The table also shows their currency’s name, along with the currency’s three letter ISO 4217 code and its usual symbol:
- United States U.S. Dollar USD $
- European Union Euro EUR €
- United Kingdom Pound Sterling GBP £
- Japan Yen JPY ¥
- Switzerland Swiss Franc CHF Sfr.
The designation of a currency as a minor sometimes depends on who is doing it, and the Com Dollars that are often influenced by major commodity price changes are sometimes grouped along with the majors.
Nevertheless, forex market participants often tend to include the following currencies among the minors:
Commodity Currencies or Com Dollars
- Australia Australian Dollar AUD A$
- Canada Canadian Dollar CAD C$
- New Zealand New Zealand Dollar NZD NZ$
Scandinavian Currencies or Skandis
- Sweden Swedish Krona SEK
- Norway Norwegian Krone NOK
- Denmark Danish Krone DKK
Exotic or Emerging Market Currencies
A great number of nations exist around the world and many of them have their own currencies. These currencies that largely consist of those issued by developing nations make up the largest group of currencies. Professional forex traders usually referred to them as the “exotic” or “emerging market” currencies.
While certainly not traded as actively as the Euro or even the New Zealand Dollar, exotic currencies number in the hundreds. They make up an important component in the realm of international commerce and finance.
The more common exotic currencies include the following:
- CNY – the Chinese Yuan or Remnimbi
- INR – the Indian Rupee
- RUB – the Russian Ruble
- MXN – the Mexican Peso
- BRL – the Brazilian Real
- CLP – the Chilean Peso
- IRR – the Iranian Rial
The above is only a partial list of some of the more actively traded exotic currencies. Many other national currencies are traded, although some countries, such as El Salvador for example, use the U.S. Dollar as their currency.