The forex market facilitates approximately $7.5 trillion in trades daily, making it the world’s largest financial market. The top 10 most traded currencies in forex have significant influence and widespread adoption among traders despite the existence of 180 circulating currencies in the forex index.
This list will delve into these influential currencies, shedding light on the factors contributing to their widespread adoption and offering valuable insights for aspiring traders.
List of Top 10 Most Traded Currencies in Forex
Understanding the most traded currencies in the foreign exchange transaction is essential for any investor or trader. The list of the top 10 most traded currencies offers valuable insights into global economic and trading patterns. It’s fascinating to explore the different types of currencies worldwide and the factors that contribute to their popularity in the forex market.
1. US dollar (USD)
The US dollar is the most used currency in world, commanding a global daily average trading volume of around $6.6 trillion. All forex trading ‘major’ currency pairs feature it, and it accounts for approximately 85% of all FX trades. No wonder USD is the most traded currency in the world.
All foreign exchange trading ‘major’ currency pairs feature it, and it accounts for approximately 85% of all FX trades. Many countries used the dollar for international trade, contributing to its prevailing status. Moreover, most currency reserves held by central banks worldwide consist of USD.
2. Euro (EUR)
The euro, as the official currency of the European Union, holds the position as the second most widely used currency in the world, with a staggering daily average trading volume of almost $2.3 trillion. This currency is employed by 19 member states and overseen by the European Central Bank (ECB).
The euro’s adoption by multiple countries minimizes currency conversion risks during trade forex, stimulating economic activity within the EU. However, economic downturns in individual member states can pose challenges, potentially impacting the euro’s stability.
3. Japanese yen (JPY)
The Japanese yen is ranked third in terms of being the most traded currency with an average daily trading volume of $1.2 trillion. Japan’s robust economy and low inflation rates make the yen a popular currencies choice for investors seeking a safe haven currency.
The Bank of Japan (BoJ) maintains meager interest rates to counter inflation, making the yen an attractive borrowing currency for carry trade strategies. Additionally, the BoJ intervenes in the yen’s exchange rate through foreign exchange trades to stabilize its value.
4. British Pound (GBP)
The British Pound is fourth among the most traded currencies in the forex market, with a daily average trading volume of approximately $840 billion. As the official currency of the United Kingdom, the pound sterling plays a significant role in the forex market.
The value of the British pound is shaped by a multitude of factors, including economic indicators, political occurrences, and the decisions made by the Bank of England regarding its monetary policy. Considered one of the most stable currencies worldwide, the British pound holds a significant position in global markets.
5. Australian Dollar (AUD)
The Australian dollar is the fifth most traded currency, with a daily average trading volume of around $440 billion. Australia’s strong ties to the Asia-Pacific region and its status as a major commodity exporter contribute to its popularity in forex trading. Economic data, interest rate decisions, and global market trends significantly impact the value of the Australian dollar.
6. Canadian Dollar (CAD)
The Canadian dollar ranks as the sixth most traded currency in the forex market, with a daily average trading volume of approximately $200 billion. Canada’s close trade relations with the United States and its status as a major exporter of natural resources contribute to the Canadian dollar’s prominence in forex trading.
Economic data, commodity prices, and market sentiment play crucial roles in influencing the value of the Canadian dollar.
7. Swiss Franc (CHF)
The Swiss franc is the seventh most traded currency in the forex market, with a daily average trading volume of about $200 billion. Switzerland’s stable economy and the franc’s reputation as a safe-haven currency contribute to its popularity in forex trading.
The Swiss National Bank’s monetary policy decisions and global economic developments impact the value of the Swiss franc.
8. Chinese Yuan (CNY)
The Chinese yuan is the eighth most traded currency in the forex market, with a daily average trading volume of approximately $200 billion. China’s growing influence in the global economy and its efforts to internationalize the yuan have increased its presence in forex trading.
Trade developments, monetary policy decisions, and economic data from China influence the value of the Chinese yuan.
9. New Zealand Dollar (NZD)
The New Zealand dollar is a prominent currency, ranking as the ninth most traded globally, with a daily average trading volume of approximately $150 billion. Its popularity in forex trading can be attributed to New Zealand’s strong connections to the Asia-Pacific region and its significant role as a major exporter of dairy and agricultural products.
The value of the New Zealand dollar is influenced by various factors, including economic data, global market trends, and decisions made by the Reserve Bank of New Zealand regarding monetary policies.
10. Swedish Krona (SEK)
The Swedish krona is the tenth most traded currency in the forex market, with a daily average trading volume of approximately $100 billion. Sweden’s stable economy and Krona’s role as a major currency in the European region contribute to its presence in forex trading.
Economic indicators, monetary policy decisions, and global market developments influence the value of the Swedish krona.
Best Forex Currency Pairs to Trade
Every forex trader needs to have a favorite currency pair. Typically, traders choose a specific pair because they know its characteristics. The most popular forex pairs are EUR/USD, GBP/USD, USD/JPY, GBP/JPY, and AUD/USD.
- EUR/USD is a favorite for beginners due to its high liquidity, low spreads, and the abundance of economic and political data that influences its movements.
- GBP/USD is considered the next level with sweeter characteristics and relatively small spreads, making it attractive for traders interested in scalping.
- USD/JPY is favored for its low spreads, high volatility, and ease of predictability, making it suitable for both novice and experienced traders.
- GBP/JPY, on the other hand, is known for its high volatility and dynamic movements, making it challenging to trade but offering significant profit opportunities.
- AUD/USD, known as the “Aussie,” may not be as popular as the others, but it functions as a proxy for market movements.
While these pairs can be recommendations, every trader has their own preferences and should thoroughly understand the characteristics of each pair before making trading decisions. It’s essential to use fundamental and technical analysis to determine the most suitable pair for trading.
If you’re interested in getting started with forex trading or improving your existing trading skills, Vestrado can provide the guidance and tools you need to make informed trading decisions and potentially achieve profitability. Sign up for Vestrado’s online platform today to access valuable resources and support for your forex trading journey.
