What are the top 5 most popular currencies to trade?

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5 Most popular traded currencies In the Forex Market

The most popular currencies in the world are those of developed nations that have large economies and participate in international trade, with significant currency supply and demand. Due to their widespread acceptance, these currencies are largely traded with high trading volumes and a highly liquid market environment.

1. The United States Dollar

The US dollar is also known as the greenback. It is the world’s strongest and most popular reserve currency. Thanks to its liquidity and increasing acceptance, it is traded against many instruments and assets in the financial markets. These trades can be executed, managed, and analyzed on platforms like Oanda.

The major pairs like EUR/USD, GBP/USD, and AUD/USD are highly liquid and volatile. This is due to the influence of the highly traded US dollar. This liquidity makes them favored amongst forex traders worldwide. 

Currencies to trade
US currency | Image Credit: Pexels/@Karolina

The United States has the largest economy in the world, and this attracts a lot of large corporations and multinational companies, including banks and financial institutions that actively and consistently trade it. These companies may be banks and financial and non-financial institutions. 

Some countries peg their currencies to the dollar to keep them stable. A dollar peg is when a country maintains its currency’s value at a fixed exchange rate to the U.S. dollar. The US dollar is highly influenced by numerous news, economic reports, and fundamental data such as Gross domestic product and Unemployment data. Traders also use it as a measure of value for other assets, including metals and commodities like gold. 

2. The Euro

The Euro is the second most popular currency in the world. Currently, it serves as the official currency of 19 members of the European Union. This status ensures that its demand and supply constantly fluctuate, and the huge trading volume provides liquidity for traders who trade pairs that comprise it. 

Euro Currency
Euro | Image Credit: Pixabay

Since many traders and investors trade the euro and the US dollar, the EUR/USD pair is regarded as the most liquid pair in the forex market. 

The euro is, in fact, the second-largest reserve currency in the world. The value or price of the Euro largely depends on the eurozone’s economy. It is influenced by news and economic data from member countries – especially major states like Germany, France, and Italy. 

3. The British Pound

The British Pound is the official currency of the United Kingdom and the oldest one in use today. The pound remained the official currency of the UK, even while the country was part of the European Union. 

As of mid-2021, sterling is also the fourth most-held reserve currency in global reserves. The Bank of England remains the central bank for the pound sterling. It issues its own banknotes and regulates the issuance of banknotes by private banks in Northern Ireland and Scotland. The British pound accounts for roughly 15% of the daily trading volume in foreign exchange markets. Its popularity is fueled by the global influence of the United Kingdom, its high economy, and the significance of the pound in international trade and commerce. 

4. The Japanese Yen

The Japanese yen is the official currency of Japan and the most popular currency in Asia. The pair is unique amongst traders and investors on different levels for a couple of reasons. Investors see the Japanese yen as a ‘safe haven’ currency because it was historically observed to remain stable or appreciate in value In times of uncertainty and unrest. This trait, however, has been questioned in recent times.

The Japanese economy is essentially export-driven and the second largest in Asia. This makes it primarily traded and exchanged in the forex market during all trading sessions, but more importantly, in the Asian session. 

5. The Australian Dollar

The Australian dollar is indeed one of the most popular currencies in the world. It is a commodity currency because its value is closely tied to the performance of the major Australian exports. These exports are primarily precious metals, iron ore, copper, crude oil, petroleum products, agricultural products, etc.

Australian dollars
Australian dollars | Image Credit: Pixabay/OpenClipart-Vectors

Other popular currencies can be paired with the Australian dollar to form highly liquid and volatile pairs. These include pairs like AUD/USD, AUD/JPY, and GBP/AUD. 

These currencies are popular, but if you’re a trader or investor, you will have to research before making any trading or investment decisions. It would help if you invested in the assets that suit your needs.

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