Top 10 Most Frequently Traded Currencies on the Globe

When the forex trading day is winding down in New York, things are just getting started over in Hong Kong. This is because the global forex market is one of the busiest in the world and sees sums of money pass through it that are hard to imagine. About $7.5 trillion travels through the market on a daily basis, as traders all over the world take positions on their favourite currency pairs.

These days, it’s not only big institutions who do the trading. The advent of the internet has opened up access to retail traders at locations all around the globe. Today, we’re going to look at the top ten currencies in the world when it comes to the pairs changing hands in forex trading action.

Top 10 traded currencies

1.       US Dollar

2.       Euro

3.       Japanese yen

4.       British pound sterling

5.       Swiss franc

6.       Canadian dollar

7.       Australian dollar

8.       South African rand

9.       Chinese yuan

10.   Hong Kong dollar

1. US Dollar

The official currency of the U.S.A. is also the top currency in the world when it comes to forex trading, featuring in nine out of ten of all transactions. Some of the most frequently traded forex pairs like EUR/USD, GBP/USD, and USD/JPY employ the American dollar, otherwise known as the “greenback” (in reference to the distinctive colouring on the reverse side of a one-dollar bill).

The USD is also widely used in international trade, and it is held in reserves by many governments and central banks. There are a couple of reasons why the dollar was chosen for its pre-eminent position in trade and forex trading. It has never been ravaged by hyperinflation in the way many other currencies have, and has never been intentionally devalued by its manager, the U.S. Federal Reserve. As a result, the USD enjoys a level of stability without parallel.

The factors that drive the USD one way or the other are many and complicated, but they include the state of the U.S. economy, reports on unemployment levels, manufacturing data, and Fed monetary policy.

2. Euro

Within three years of the introduction of Europe’s single currency, which was on January 1st,1999, the euro had taken over the role of domestic currency in several European Union (EU) nations. Some of the other states decided, instead, to peg their own currencies to the value of the euro. The reason for its creation was to open the economic channels between EU members, which would lead to improved growth and stability. For instance, when European nations invest money into their neighbours, the common currency alleviates the foreign exchange risk that normally accompanies such transactions.

 The European Central Bank (ECB), which manages the euro, works a bit differently to the US Federal Reserve in that their chief mandate is holding prices stable. The Fed, by contrast, also worries about keeping employment levels high. As a result of the difference, inflation tends to be the key driver of the ECB’s interest rate decisions.

 The euro makes it easier for Europeans to travel within the continent, without having to exchange money upon arrival in new destinations. One thing it’s criticized for is its centralized management at the ECB, because it can be problematic to set a single monetary policy to fit such a variety of economic climates as pertain in the EU countries.

3. Japanese Yen

Third on the world currency ranking list is Japan’s yen, which goes by the abbreviation JPY. It made the news in 2022 by falling to its lowest level against the USD in 24 years. Another time when its value seriously plummeted was in the aftermath of World War Two. In the more recent case, the responsible factor was the Bank of Japan’s immovable insistence on keeping interest rates low, when other central banks were pursuing aggressive hiking schedules.

 The yen is viewed as a safe haven, which means traders tend to buy it when risk is out of style in financial markets. At such times, it often gains in value, but this dynamic wasn’t of any help to it during the economic uncertainty of 2022.

4. British Pound Sterling

Believe it or not, Britain’s pound has been actively used since the year 760, although it only took on the status as official currency later on in 1707. Before the waning of the British Empire in the twentieth century, the pound played the role of world reserve currency, as the USD does in our times. It was also legal tender in many of Britain’s colonies like Australia, New Zealand, and Canada.

 Sterling took a beating when the UK said farewell to the EU in 2016, in the withdrawal process known as Brexit. It also plummeted in 2022, when Prime Minister Liz Truss announced her plans for unfunded tax cuts. In forex trading, you’ll find it in such popular pairs as GBP/USD or EUR/GBP.

5. Swiss Franc

The first noteworthy thing about Switzerland’s national currency is its abbreviation, CHF, which you might not have been able to extrapolate on your own. The second thing is the unique nature of the Swiss National Bank (SNB), which issues the franc. The SNB is actually a corporation with partial private ownership. The bulk of the policymaking is made by three individual bankers who meet every financial quarter. 

 In forex trading, you may notice the CHF, very much like the EUR, isn’t a big mover. Usually, its movements for the day are restricted within a range of about 45 pips.

6. Canadian Dollar

Because Canada’s natural resources are so foundational to their economy, their currency tends to be very sensitive to fluctuations in commodity prices. The CAD, which is also known as the “loonie”, is one of the currencies held in reserves by many central banks, partially owing to Canada’s number ten ranking in the list of largest world economies. It has been in use since 1858, when it took the place of the various provincial currencies used in the region.

7. Australian Dollar

Like Canada, Australia is an ex-British colony that runs an economy resting on the export of commodities – in this case, coal and iron ore. Behaving similarly to its counterpart in the northern hemisphere, the AUD plummeted by over 15% when the prices of commodities slumped in 2015. The “Aussie” was born in 1966, when the Australian pound – a remnant of the nation’s colonial past – was phased out. The general political stability in the region, together with the government’s non-interventionist policy, have made the AUD popular in forex trading circles.

8. South African Rand

The abbreviation, ZAR, stands for the Dutch words, Zuid-Afrikaanse Rand, which reminds us of the nation’s colonial history. South Africa’s currency has traditionally been linked with the price of gold because of the country’s rich resources in this area. In 1961, the South African pound was replaced by the rand, which adopted a rate of two rand to one British pound. Since that time, the rand has tended to lose value against the USD and, during the Covid pandemic, the rate of 17 rand to a single dollar was reached. The South African Reserve Bank, which issues the rand, is actually a private entity owned by 800 shareholders, each of whom control less than 1% of the body.

 In 2019, a full 15% of South Africa’s exports were made up of gold, but the country is also blessed with deposits of iron ore and palladium. Neighbouring Namibia and Lesotho have pegged their currencies to the rand.

9. Chinese Yuan

The official name of China’s currency is the renminbi, and it goes by the initials CNH in forex trading. The thing to know about it is that China’s central bank ensures its value doesn’t rise all that much. The bank tends to enter the forex market and make large purchases when they want to suppress the yuan. The reason they do this is to make the nation’s exports stand out as exceptionally cheap on the global scene, which is a major driver for the economy.

 China became the biggest giant among global manufacturers back in 2010, helped along by this official monetary policy. American manufacturers have protested that China’s manipulation of the yuan gives their own companies an edge over others. It’s also true, however, that American consumers and businesses benefit from the cheap goods coming out of China, which may help hold down inflation in the U.S.

10. Hong Kong Dollar

You’ll encounter Hong Kong’s currency in the forex markets under its alias as HKD. It is monitored and controlled by the Hong Kong Monetary Authority (HKMA), which pegs it tightly to the value of the US dollar. Normally, when the HKD wavers below the rate of 7.7500 to the USD, or above the rate of 7.8500 per USD, the HKMA comes out and restores it to its set range. This highly traded currency was born back in 1863.

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Summing Up

One thing we’ve learned is that the factors pulling the strings behind one currency are not necessarily the same as those pulling them behind another. In addition, central banks tend to pursue varying agendas. Therefore, forex traders should spend time studying the elements that typically drive a given currency, and, more so, those that are especially likely to do so at present, given the economic climate.