4 Most Tradable Currencies
May 20, 2018
If you have been a trader for a while, you will be aware of how exhaustive the Forex market is. It is popular because it is large and has a high liquidity at the same time. If you are getting started in this market, it is important for you to know which are the most commonly traded currencies and why. Here are 4 most tradable currencies and the characteristic features that make them so.
The U.S. Dollar is a symbol of power. It is also the most tradable currency in the world. It has a pair with all the major currencies and is almost always a mediator in all sorts of currency transactions. The primary reason for this is the fact that the USD is an unofficial global reserve currency and this is reinstated by almost all the investment authorities in the world.
Due to the fact that the USD is globally accepted, there are some countries that have adopted it as their official currency and this process is popularly known as Dollarization. It is also significant in the Forex market where it often becomes a benchmark for other countries to pinpoint a relative value. Yet another factor is that USD is the currency for commodities like precious metals and crude oil etc.
The most interesting thing is that the Euro is still new to the market but it has quickly reached the second most tradable position of currency and is right after the USD. It is also the second largest reserve currency in the world. Since the Euro is used all across the globe, it is also quite popular in the Forex market. It is known to make a currency pair very liquid when it trades with one.
Japan’s major strength comes from its export economy and thus the Japanese Yen happens to be the most tradable currency in Asia. The Yen is popular for carrying trade in the Forex market. Its zero interest rate policy for more than two decades has made it even more popular.
The Great British Pound comes fourth in line in the list of the most tradable currencies. It is also known as the pound sterling and it is also a huge reserve currency. Studies show that Forex traders generally peg its value on the basis of how stable the economy and the government is. It also adds the component of liquidity to the Forex market.