Most Traded Currencies in the World

Though there are almost 160 different currencies all over the world and all have different exchange values, most of those are not traded outside their home countries. The Continuous Linked Settlement Bank or CLS trades in only 17  are most traded currencies in the world. These so-called major currencies account for 90% of global foreign exchange volume and are usually known as having tight spreads and huge liquidity. If we add 20 or more “exotic currencies” to expand this exclusive club of currencies then it accounts for 97% of overall trade volume across the globe.

Major Currencies/ Most Traded Currencies in Forex Market

8 most traded currencies in the forex market

• United States Dollar ($) or USD

USD is the most sought-after currency in the world. Having been backed by the robust economy of the US which is the largest economy in the world. Having a gross domestic product or GDP of $22.675 trillion, the United States of America stands at the center of global trade. Being the lead driver of globalization, the US controls the global financial system, requiring governments, organizations, traders, and ordinary folks to transact only in dollars internationally. This means there always will exist a global demand for this currency, giving this currency a permanent or strategic edge over all other currencies in the world. Despite these facts, there are some events that directly affect the value of USD and those are interest rate decisions by the federal reserve or fed,  major events like a trade war with China, instability in the Middle East. Overall this currency is a safe bet in the long run.

• Canadian Dollar ($) or CAD

CAD or Canadian Dollar, also known as “loonie”, is the sole legal currency of Canada. Since Canada is a pacifist nation, the value of the CAD is less affected by global events like instability in the Middle East or the Taliban takeover of Afghanistan. CAD is also known as a “commodity currency”, meaning its exchange value co-moves with the global prices of primary commodity products as the Canadian economy over-relies on the export of crude oil to the United States, which is the largest single contributor of foreign exchange to Canada, and its share has been increasing. Canada exports 95% of its crude oil to the US which is 40% of the total crude oil import of the country, establishing a strong correlation between the Canadian/U.S. dollar exchange rate and oil prices.

• Great Britain Pound (£) or GBP

Of all the most traded currencies GBP or Great Britain Pound is the legal tender of the United Kingdom of Great Britain and Northern Irelands, Jersey, Guernsey, the Isle of Man, Gibraltar, South Georgia, and the South Sandwich Islands, the British Antarctic Territory, and Tristan da Cunha. This currency is also known as Pound Sterling. Sterling or GBP is the fourth most-traded currency in the foreign exchange market and is also the fifth most-held reserve currency in the global reserves.

Like any other currency, five factors affect the value of the GBP most and those are the consumer price index or CPI report, published by the British Office for National Statistics. This report indicates the current condition of the prices and inflation level of the goods and services in the British economy. Monetary Policy enacted by the Bank of England is the second-most-important factor that affects the value of the Pound. Consumer confidence and sentiment report published by Gfk Consumer Confidence, and nation-wide Consumer Confidence Survey Reports comes third on its bearing on the value. Economic growth or GDP report comes fourth and the country’s balance of payment comes fifth. 

• European Euro (€) or EUR

EUR is the 2nd most traded currency and is the official currency of the 19 member states of the 27 member states of the European Union or EU. Euro was introduced in 1999 by the EU. As of today, EUR is the second most-sought after currency after USD. The European Central Bank or ECB, which is the central monetary authority of the eurozone, is manded with the value of the euro and maintaining price stability. Interest rate decisions by this organization have the most bearing on the value of this currency. The Euro has proved to be very robust despite its humble beginning, the currency initially fell in reaction to the global financial crisis of 2009 but regained later and remained stable throughout the European Sovereign Debt Crisis. News related to the countries that are there in the Eurozone, decisions of ECB, employment rates, job creation report, budget deficit and national debt level of Eurozone countries, economic growth of Eurozone countries affect the value of this currency most. 

• Swiss Franc (₣) or CHF

CHF or Swiss Franc is the legal tender of Switzerland and Liechtenstein. It is also used in the Italian exclave of Campione d’Italia. The Swiss National Bank or SNB is the central bank of Switzerland and the regulating authority, the decision of which carries the largest bearing on its value. The franc is widely viewed as a financially safe refuge due to the stability of the Swiss government and its financial system.

After the Eurozone Debt Crisis, investors started flocking to Franc to seek safe haven whereas loose monetary policy by the Fed made the USD less attractive during those days. As a response, CHF was initially pegged to the Euro at 1.20 Francs per Euro. But on 15 January 2015, SNB unexpectedly removed the peg and as a result, the Swiss Franc rallied a whopping 30% via-a-vis the EUR and 25% against the USD. Swiss economic data like m3 money supply (the broadest money supply), consumer price index (CPI), unemployment rate, the balance of payments, GDP, and industrial production affect the value of CHF most. Besides, due to the close economic ties between Switzerland and Europe, the exchange rate of the Swiss franc and the euro depicts a great positive correlation. Meaning, the rise of the euro will also lead to the rise of the Swiss franc and vice versa. The relationship between the two is the closest of all currencies.

• Australian Dollar ($) or AUD

AUD or Australian Dollar is the 5th  most traded currencies and the official currency of Australia, including its overseas territories of Christmas Island, Cocos (Keeling) Island, and Norfolk Island. Besides it is also the legal tender of three independent countries: Kiribati, Nauru, and Tuvalu. Like any other thriving currency, the value of the AUD is also affected by the data on GDP, retail sales, industrial production, inflation, and the country’s trade balance. Since the Australian economy is driven by commodities (both grains and metals), any news on crop planting, weather, harvests, mine output, and metal prices all can move the Australian currency. Another interesting fact about AUD is that it is counter-cyclical and volatile. Usually, major economies trade with each other in tandem but Australia is a different case. Since most of the Australian exports go to the growing Asian economies so their value is closely correlated with the prices of commodities.

• New Zealand Dollar ($) or NZD

NZD or New Zealand Dollar is one of the most traded currencies and the official currency of New Zealand, the Cook Islands, Niue, the Ross Dependency, Tokelau, and the Pitcairn Islands. It is also known as “Kiwi” or “Kiwi Dollar”. NZD is often considered a carry-trade currency, meaning due to its high-yielding nature many investors often buy it and fund it with a lower-yielding currency such as the Japanese Yen or Swiss Franc. Apart from internal economic dynamics, the prices of dairy products and tourism numbers heavily affect the value of NZD, and New Zealand is the world’s largest exporter of whole milk powder, pushing this currency into the ranks of commodity currencies. Milk prices and NZD have a positive correlation. The same is the case with the country’s tourism figures. Due to the robustness of the New Zealand economy, the NZD is considered a major stable currency. 

• Japanese Yen (¥) or JPY

JPY or Japanese Yen is one of the major currencies. Having been the official currency of Japan, JPY is the third most traded currencies or sought-after currency in the foreign exchange market after USD and Euro. It is considered a safe haven currency as this currency remains mostly stable and is low-yielding. Major Japanese economic data like the release of GDP, retail sales, industrial production, inflation, and trade balances report drive the value of Yen. Since Japan is the largest creditor nation in the world, the demand for this currency and its requirement to be kept in reserve is always there, adding further legitimacy to it. On the other hand, since Japan is prone to earthquakes, events of this kind always have a negative bearing on the value of JPY.

Most Traded Exotic Currencies in Forex Market

The most traded Currencies that are associated with the emerging market economies are known as “exotic currencies” or “emerging market currencies”. The main feature of these kinds of currencies is that they are very high-yielding. They are also known for high rates of growth and also for high rates of inflation. Their capital markets lack the sophistication of their western counterparts but they are often supported by high-interest rates. During times of rapid economic growth, these currencies outperform major currencies and during times of uncertainty, they also lag far behind.

• Hong Kong Dollar ($) or HKD

HKD or Hong Kong Dollar is the official currency of the Chinese Special Administrative Region of Hong Kong. The Hong Kong Monetary Authority is the sole controlling authority for this currency. Despite Hong Kong being part of China, its economy and monetary system are separate from that of mainland China. The HKD has been pegged with USD at a rate of 7.8 HKD/USD since 1983 and allowed to fluctuate only within a tight range. It is the eighth most traded currencies in the world. This currency is important to the forex market mainly because of the vast sums that the Hong Kong Monetary Authority spends to maintain the peg.

• Chinese Yuan (¥) or CNY

CNY or Chinese Yuan is the sole legal tender of the People’s Republic of China or PRC. Having been the second-largest economy in the world, this currency should have been at the forefront of international trade and commerce. But this is not the case. People’s Bank of China (PBOC) pegs the Yuan to the USD at an artificially low rate to accelerate the growth of Chinese exports, making this currency less attractive to the speculators.

Though the Yuan has been allowed to float against the US dollar since 2005, that is a controlled float. Besides, PBOC has to purchase $40 billion every month to maintain the peg and it also maintains strict control of trading the Yuan outside mainland China. In addition, Chinese capital markets are smaller than their western counterparts and show less transparency. Recently authorities have encouraged the exchange of Yuan to carry out international trade. For that matter, the Chinese government has instituted currency swap agreements with some of its trade partners. According to some estimates, by 2035 CNY may account for about 3% to 12% of international currency reserves. 

• Indian Rupee (₹) or INR

INR or Indian Rupee is the official legal tender of India. Factors that affect this currency are the rate of retail inflation (CPI), wholesale price inflation (WPI), the real rate of interest of the Indian economy, seasonal dollar demand from importers and banks, fundamental fiscal and trade-related issues, and government meddling.  For quite some time, the value of the rupee to the US dollar has been range-bound. For example, after crossing the value of the dollar at 73 rupees to 1 US dollar, the rupee has been oscillating between that and 75.5 rupees per dollar.

• South Korean Won (₩) or KRW

KRW or South Korean Won is the official currency of South Korea. A single won is divided into 100 jeon. This currency is issued by the Bank of Korea. The exchange value of Won is determined by the supply and demand mechanism of the market which is reflected in the current and capital account balances. South Korea has run a current account surplus since May 2012, with the exception of April 2019. Despite this, the won’s gain against the US dollar has been marginal. The value of the won has been relatively stable over the last ten years. As of February 2021, 1 USD is equivalent to 1,098 won.

• Mexican Peso ($) or MXN

MXN or Mexican Peso is the currency of Mexico. This is one of the fifteenth most traded currencies in the world and the third most sought-after currency in the western hemisphere after the USD and CAD. The Mexican peso is considered a formidable international financial instrument due to its relative stability and high liquidity in the market. Three factors are pointed as main drivers for peso’s being one of the demanded currencies and those are higher interest rates and carry trade opportunity, Mexico’s proximity with the United States, and Mexico’s dependence on crude oil exports. Making this money one of the “commodity currencies”. The correlations between peso and oil also make it an excellent way to speculate on crude prices.

• Russian Ruble (₽) or RUB

RUB or Russian Ruble is the currency of the Russian Federation, and four different republics of Abkhazia, South Ossetia, Donetsk, and Luhansk. This currency was introduced in 1993, replacing the Soviet Ruble. Russia is heavily dependent on crude oil and natural gas as a driver of its economy, effectively making the Ruble a commodity currency. Exports of crude oil and other commodity products accounted for more than two-thirds of the Russian exports in 2013. The economy was the eighth biggest economy in the world back in 2013 with a GDP valued at a whopping $2.3 trillion.

The Russian economy registered exponential growth between the years 2000 and 2012, driven largely by constantly upward moving energy prices and robust arms exports. Recently the economy has taken a big blow by the falling crude oil prices in the international market which plummeted by 50% in 2014, due to falling demand in Europe. Factors like global demand for crude oil, policy and tactical decisions by the Organization of the Petroleum Exporting Countries (OPEC), geopolitical situations like the civil war in Syria, instability in Ukraine, which Russia invaded in February 2014, and the country’s tense relations with the west affect the value of the RUB most.

• Polish złoty (zł) or PLN

PLN or Polish złoty is the official legal tender of Poland. This currency can be considered as a currency which is waiting to be replaced by the Euro as one of the conditions of Poland’s joining the European Union (EU) was that the country will eventually have to adopt the Euro instead of its current national currency but that is subject to some stability criteria. However, during the early 2000s, złoty remained highly unstable and stabilized only after the Great Recession of 2008-09, due to the economic development of Poland. The Polish economy continued to grow for many years and in 2018, registered a growth of 5%, well above the EU average. Reports on the economy’s health, mainly on industrial production, retail sales, employment, and wage statistics have a huge bearing on the value of PLN. Besides external reports like Eurozone economic growth statistics, and any decision by the European Central Bank (ECB) also affects its value.

• Turkish lira (₺) or TRY

TRY or Turkish lira is the official currency of Turkey and Northern Cyprus. The Turkish lira has undergone tremendous pressure in 2018 which continues to this day. The country’s President Recep Tayyip Erdoğan has been preventing the central bank from making necessary interest rate adjustments, a policy paralysis which culminated in the lira’s continued loss in value which reached a level of US$4.5/TRY by the middle of May 2018. On a broader scale, the Turkish lira has depreciated by over 400% against both USD and EUR since 2008, due to the expansionary economic policy of the president of the country.

However, throughout early 2018, the lira recovered its value partly due to hikes in the interest rate. But this currency suddenly took a turn for the worst after the abrupt sacking of the central bank chief by president Erdoğan and reached an all-time low of 8.8 TRY/USD, making it the most quickly collapsing currency of 2021. With astronomical levels of inflation in the Turkish economy, the lira continued to collapse against the US dollar and by December 17, reached an unprecedented level of 12.5 lira to 1 US Dollar. For all practical purposes, the currency remains highly unstable. Turkish involvement in the ongoing civil war in Syria, its being on the gray list of the Financial Action Task Force (FATF), its strained relations with the west, domestic insurgency against the Kurd population are the events that loom large on the value of TRY.

• South African Rand (R) or ZAR

ZAR or South African Rand is the national currency of South Africa. Besides, it is also used as a legal tender in the Common Monetary Area member states of Namibia, Lesotho, and Eswatini. Though these countries have their own national currencies, those have been pegged with the rand at par since their respective inceptions. Market watchers have cited six different factors that have the largest bearing on the value of the rand and those are the supply and demand situation of South African exports, which are high in demand. The second factor is the availability of money, the third is the inflation rate, the fourth is interest rates, the fifth is political stability in South Africa and the last one is its demand in relation to the US dollar.

• Brazilian Real (R$) or BRL

BRL or Brazilian Real is the official currency of Brazil with the Central Bank of Brazil as its regulating authority. It was introduced in 1994, replacing Cruzeiro Real. As of April 2019, Brazilian Real is the twentieth most traded currencies in the world. After years of exponential economic development, Brazil has slowed down a bit, forcing its GDP to shrink more than 7% in 2016-16. Rising government expenditure, the commodity price super-cycle which has fuelled the Brazilian economy since 2004 has halted, declining metal prices globally which was followed by food prices in 2014 has hit the Brazilian economy hard. Besides, the Brazilian government has taken some economic measures to reverse the trend which have proved to be less effective. Since then the BRL has been in the doldrums.

• Hungarian Forint (Ft) or HUF

HUF or Hungarian Forint is the official currency of Hungary, a European Union country. Since its introduction on 1 August 1946, Forint has succeeded in stabilizing the Hungarian economy. Hungary’s transition to the market economy has adversely affected the value of HUF when inflation reached its peak of 35% in 1991. Since the early 2000s, inflation has been confined to single digits and Forint remains fully convertible. As a member of the EU, the government is expected to replace HUF with EUR but that may not happen anytime soon. Local interest rates, real GDP, stock values, inflation rates, and the expected exchange rate are the main determinants of Forint’s exchange value.

• Malaysian Ringgit (RM) or MYR

MYR or Malaysian Ringgit is the sole currency of Malaysia with Bank Negara, the central bank of Malaysia as its issuing authority. Being a crude oil-producing country, the international prices of oil affects the value of the Ringgit most. During the recent global oil boom of 2009-14, the Malaysian Ringgit gained in value, hitting a peak of 2.9390 against the US dollar in July 2011. Likewise, during the collapsing crude market, Ringgit lost much of its value against the USD and settled at 4.45 MYR/USD on 29 September 2015. Interest rate decisions by the central bank come second when it comes to the value of the MYR. The dynamic political landscape of the country is the third most important factor affecting the value of the Ringgit whereas its relation to the US dollar comes last in affecting its value.

• Philippine Peso (₱) or PHP

PHP or Philippine Peso is the official currency of the Philippines. The country is considered a “newly industrialized country” with a gross domestic product or GDP of $356.8 billion. Philippine’s primary exports are semiconductors, electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, and fruits. Besides, the country has a sizable working population abroad who send remittances which add to the value of PHP. Like any other currency in the world, the value of the Philippine Peso primarily gets affected by the demand and supply situation on the ground. Besides, the volume of imports in relation to the country’s exports, the government’s borrowing from the foreign lenders, the remittance situation, and interest rate decision by the country’s central bank has a bearing on Peso’s exchange value.

• Chilean Peso ($) or CLP

CLP or Chilean Peso is the national currency of the Republic of Chile, with Banco Central de Chile as its central bank to regulate it. Being the world’s largest exporter of copper, the Chilean Peso can be categorized as a “commodity currency”, making the currency highly sensitive to the fluctuations in the value of copper. Besides, the domestic political issues loom large on the Peso’s value. For example, the presidency of Chile’s current leader Sebastián Piñera has been marked by protests against the prevailing economic inequality in the country. On the other hand, good COVID pandemic management by the administration has contributed to the soaring approval rating for the embattled president. With these factors, the Chilean Peso is a good investment instrument for those who seek high risk, more gain.

• Indonesian Rupiah (Rp) or IDR

IDR or Indonesian Rupiah is the official currency of Indonesia with Bank Indonesia as its controlling authority. Like the Philippines, Indonesia is also considered a “newly industrialized country” with a GDP of $1.159 trillion it is classified as the world’s sixteenth largest economy. IDR is also a “commodity currency” as commodities like oil, natural gas, coal, tin, copper, gold, nickel, and agricultural produce like rice, palm oil, tea, coffee, cacao, spices, and rubber take the lion’s share of the country’s export mix.

Since multiple commodities are involved in this mix, no single commodity has the largest bearing on the value of the Rupiah. On the other hand, international events like the ongoing US trade war with China affect the value of the Rupiah most in the short run. According to the Jakarta Interbank Spot Dollar Rate (JISDOR), in May 2019, the value of IDR fell in relation to USD and reached 14,380 IDR/USD, after the US president took a more hardline approach against China.

• Israeli Shekel (₪) or ILS

ILS or Israeli Shekel is the official currency of the State of Israel and the Palestinian territories of the West Bank, and Gaza Strip. The current version of Shekel was introduced on 1 January 1986, replacing the old one due to hyperinflation. As Israel is considered the most developed country in Western Asia and the Middle East, its national currency stands on a very strong footing. Recent trends like greater expectations of an interest rate hike, massive foreign direct investment in Israel, the expectation of less intervention by Israel’s central bank in the foreign exchange market, and a simultaneous rise in the global equities market have led the Sheket to reach new heights against the USD.