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World’s Most Important Currencies

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World's Most Important Currencies

With the presence of more than 200 countries in the world, currencies specific to each country have also been formed. Some states use the same currency as countries with which they feel close and have historical ties, while others have created their own currencies. The fluctuation process in the global economy is affecting the value of the currencies of many countries more than ever. In this article, we will explore some of the world’s most important currencies.

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World’s Most Important Currencies

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US DOLLAR (USD)

The most exchanged currency in the world is the US dollar (USD). According to Bank for International Settlements, the average volume of daily USD accounts is $2.2 trillion. The U.S. Dollar, the official currency of the United States, is also the world’s primary reserve currency.

The U.S. dollar is one of the most traded currencies in the world, as it can be traded with all other major currencies, and is used as an intermediate currency in tri-currency transactions, as it is considered as an informal reserve global currency maintained by central banks in countries, and used by many countries as an official currency rather than a local currency, due to its global acceptance, as well as being used by some countries as an alternative and informal method of payment while retaining its official domestic currency.

It turns out that there are other countries that use USD as an official currency other than the country’s currency, namely East Timor and Zimbabwe.

Euro (EUR)

The euro is the second most traded currency in the world after the US dollar, and also the second largest currency reserves in the world. The euro was introduced to the world markets at the beginning of 1991. It is used by almost all countries belonging to the European Union, such as France, Germany, Austria, and Denmark. The word ‘euro’ itself was chosen because it clearly refers to Europe.

Because the system is centralized, exchange rates and other financial policies are controlled by the Central Bank of the European Union. This leaves its member states bound by any decisions made. However, the added value is that the Euro currency will be more stable, as member states are forced to follow policies set by the EU central bank.

The strength of the EUR currency is proven by its predicate as the world’s 2nd ‘Currency Reserve’. That is, about 22.2% of all reserve currencies in the world are in the form of Euros.

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Japanese Yen (JPY)

The Yen is Japan’s official currency and the third most traded currency in the world, with an average daily volume of nearly $550 million. It is also the third largest reserve currency and would account for about 4.9% of the world’s reserves.

The value of the Yen depends heavily on the strength of the Japanese economy, and in particular its manufacturing sector. It is the main source of the country’s exports, including vehicles, electronics, machine tools, ships and textiles. Since the value of the yen often increases with demand for these products, most forex investors follow the economic publications closely. These may include announcements from BoJ meetings, GDP data, the industrial production index, the Tankan survey and unemployment figures.

The Uniqueness of Japan’s Currency

The yen is classified as a currency that is quite unique in the world. If other countries put portraits of leaders or heroes in their official exchanges, that’s not the case with Japan. Sakura country prefers ordinary people who are engaged in education or art to decorate the country’s currency.

Although it is the currency of Asian countries, the Yen has the strongest position and favourite compared to other Asian currencies. In forex, yen is commonly used as the most common exchange tool along with Dollars, Euros, and  Pounds.

British Pound (GBP)

The pound sterling is the official currency of the United Kingdom and its territories, and the fourth most traded currency in the world. It is also the fourth largest reserve currency and would account for about 4.5% of the world’s reserves in value.

The name pound sterling or pound is derived from the Latin “pondus” which means heavy. Meanwhile, in Old English, pounds were a unit of weight equated to the Ancient Roman weight of libra. That is why, the symbol of the UK currency is “£” which refers to the number “L ” in libra.

The UK is also the largest centre of forex trading, with the London trading session accounting for more than 40% of daily turnover.

The value of the pound depends in large part on the uk’s economic performance. Inflation data, Bank of England (BoE) monetary policies, GDP and employment reports are likely to have an impact.

GBP is also often used as a transaction in conducting international trade.

Australian Dollar (AUD)

The Australian dollar is the official currency of the Commonwealth of Australia and the fifth most traded currency in the world, representing an average daily volume of US$174 million. It is the sixth largest reserve currency, accounting for 1.8% of the world’s reserves in value. The Australian dollar is issued by the Reserve Bank of Australia (RBA).

The value of the Australian dollar is strongly influenced by commodity prices and “terms of trade” (the ratio of the value of exports to the value of imports). Australia is a major exporter of coal, iron and copper, and other raw materials, and a major importer of oil. Changes in the volume of trade and prices of these products may therefore have an impact on the Australian dollar.

The value of the currency also depends on the country’s external debt. Indeed, an increase in this amount could lead to a decrease in the value of the AUD relative to the currencies of the major trading partners. In addition, a divergence between the RBA’s interest rates and those of other central banks can affect prices. Funds are likely to flow to countries with higher interest rates rather than countries with lower rates.

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