Which Currencies Are Traded In The Forex Market?

which currencies are traded in the forex market?At last count, there were 193 different political units, or countries, in the world. All of these, with the exception of the countries in the euro zone that use the euro as their common currency, have their own currency which potentially could be paired with another currency and traded in the Forex market.

In common practice Forex brokers determine which currencies will be made available to their clients and how they will be paired with other currencies for purposes of speculating on the exchange rate between them.

Some brokers offer a vast selection of currency pairs, while others limit their offerings to the major pairs.

Most Forex traders are content with trading currency pairs that involve the world’s major currencies. The reason behind this is actually quite simple. The currencies of countries with large economies are diverse and therefore not dependent on the value of one or two major exports, such as gold and oil. Additionally, the developed countries are not subject to the political turmoil that can cause vast, erratic changes in a currency’s value.

When combined into currency pairs, there are seven that are considered majors. They are the EUR/USD, GBP/USD, USD/JPY,EUR/JPY, AUD/USD, USD/CAD and USD/CHF. Note how six of the seven major pairs contain the United States dollar (USD). The other currencies are the euro (EUR), Great Britain pound (GBP), Japanese yen (JPY), Canadian dollar ((CAD) and the Swiss franc (CHF). It is worth mentioning that some think that there are only four major currency pairs, but we’ll chalk that up to a question of opinion, and leave it at that.

Any currency pair that does not contain one of these currencies is described as an exotic pair. Trading any of the exotic currencies entails a much higher degree of risk and unpredictability than does limiting trading activity to any of the major currencies. Values can change rapidly, completely unpredictably and with complete disregard to logic.

The benefit of restricting trading to the major currency pairs is that there are so many traders participating that the exchange rates are kept under tight control by the market forces of supply and demand. On any given day, there are a sufficient number of traders involved and currency units changing hands to achieve a fairly even balance between forces who perceive that a currency will increase in value in comparison to the currency with which it is paired, and those who have the opposite opinion.

The average daily volume of the Forex markets is approximately $4 trillion U.S.

The EUR/USD currency pair accounts for roughly 28% of the total. The USD/JPY comes in at 17%, the GBP/USD 14%. These three make up the early 60% of the Forex markets. The USD/CHF, USD/CAD and AUD/USD contribute another 13%, and all the rest of the world’s currencies contribute the remaining 28%.

In addition to the major pairs, there is also a category known as currency crosses, the most popular of which are those that pair the euro with the yen, Great Britain pound and the Swiss franc.

For more information concerning what currencies are available for trading, pay a visit to the website of New Zealand’s foremost Forex broker, Lucror FX, at www.lucrorfx.com today.

 

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